Hire Purchase

Hire purchase is a method of buying goods where you pay in installments, but you only own the item after you've made all the payments. Think of it as a long-term rental with the option to buy.

• What it is: It's a type of installment credit. You agree to "hire" the goods, but you have the option to purchase them.

• The Agreement:

  • You, the hirer, take possession of the goods.
  • You pay a stated amount in regular installments (weekly, monthly, etc.).
  • These installments cover both repayment of the initial price and interest charges.
  • You don't own the goods immediately!

• Ownership: You only become the owner (the property of the goods transfers to you) after you've made all the agreed-upon payments.

• Regulation: Hire Purchase in India is governed by the Hire Purchase Act of 1972. This act defines HP in an agreement that lets goods to let on hire and lets the hirer the option to purchase according to the terms of the agreement and Includes and agreement under which

  • The owner delivers possession of goods thereof to a person on condition that such person pays the agreed amount in periodic instalments.
  • The property in the goods is to pass to such person on the payment of the last of such instalments, and
  • Such person has a right to terminate the agreement at any time before the property so passes".

In a Nutshell: You get to use the item while paying for it, but you don't own it until you finish paying.

Your Rights (as the Hirer)

• Option to Purchase: You can choose to buy the goods at any time by giving notice and paying the outstanding balance of the "Hire Purchase Price" (which includes the interest), less a rebate.

• Right to Return: You can return the goods, but this usually involves paying a penalty or some charges as determined on the hire-purchase agreement.

• Assignment (with consent): You can, with the owner's permission, transfer both the benefits and responsibilities of the agreement to someone else.

• Protection Against Wrongful Repossession: If the owner takes back the goods illegally (without proper cause), you can recover the goods, plus damages for the loss you suffered, or you can sue for the value of the goods.

Additional Rights

• Rights of protection
• Rights of notice
• Rights of repossession
• Rights of Statement
• Rights of excess amount

Your Obligations (as the Hirer)

• Pay Installments: You must make the agreed-upon payments on time.

• Reasonable Care: You have to take good care of the goods and use them responsibly.

• Inform the Owner: You need to tell the owner where the goods are being kept, if requested.

The Owner's Rights

The owner has the right to end the agreement if you:

• Fail to pay the installments as agreed.
• Break any other term of the hire purchase agreement.

If you default, the owner can:

• Forfeit the Deposit: Keep any initial deposit you paid.

• Retain Installments: Keep any installments you've already paid.

• Recover the Balance: Demand the outstanding balance that is due.

• Repossess the Goods: Take back the goods (but this might require a court order, depending on the goods and the amount you've already paid).

Key Differences from Leasing

Advantages

• Consumers don't have to pay for the full good in cash.
• Acceptance rates are higher than other loan options.
• You are able to purchase the good even if you don't have enough cash.

Disadvantages

• Lack of awareness.
• A hire purch–se agreement is yet another form of personal debt it is monthly repayment commitment that needs to be paid each month
• A consumer d–esn't have legitimate title to the goods until the final monthly repayment has been made.
• Consumers that have a bad credit rating will either be turned down or will be asked to pay a high interest rate.

In short: Hire purchase is a way to buy goods on credit while using them, but the owner retains ownership until all payments are completed.