- There may be a resulting penalty if the hired asset is longer needed due to change in business strategy of the hirer or some other valid reason.
- Due to considerable high interest rates, the total amount to be paid is usually higher than the principal amount/cost of the asset.
The group that benefits from the Hire Purchase is the entrepreneurs and small-scale companies. Here the important and expensive assets can be hired and later owned which guarantees that they can have use of the asset from the very first day of acquiring the asset and can buy the same asset later on with the money earned from it.
Hence in recent times hire purchase has become a common source of financing. If the individual or a company is financially not sound then hire purchase is a convenient way to afford and acquire assets. However the agreement should be read thoroughly before signing it in order to save yourself from the future conflicts, if any, and understand the involved costs and disclosures provided in it.
Hope the article would have provided you the basic knowledge of Hire Purchase. If you think some points have been missed out or you want to share your views on this topic, then please do so by typing in the comment box given below.
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