Hire purchase is an option for those buyers who cannot pay the whole amount of his or her purchase. Hire purchase refers to an agreement where the buyer of a good can take goods on a monthly rental basis and once the rent equals original price of a good in addition to the interest then the buyer may exercise his or her option to buy the goods at a predetermined price or return the goods to the owner. Given below are some of the features of hire purchase –
1. The person who has hire the goods will give regular installment or rent to the owner of the good which will include some portion of principal amount and some portion of interest as agreed by both the parties.
2. The ownership of good passes only when the person has paid the last installment of the goods which he or she has hired.
3. Under hire purchase system the buyer can return the goods to the seller if he or she does not want to continue with the agreement.
4. In case of hire purchase the person who has taken the good on hire cannot transfer the goods to a third party as he or she does not have the ownership of the goods.