A contract whereby the owner of goods leases them to a hirer for rental, providing for the payment of the full price in instalments, the hirer being given an option exercisable at the end of the hiring or earlier to purchase the goods.
A hire purchase agreement is an attractive option for small business looking to manage their finances. It differs from a conventional loan in that there is technically no actual lending or borrowing occurring. A hire purchase agreement can be used as a substitute to a business loan. The hirer pays ‘rent’ for the goofs in fixed, regular payments. The original owner of the goods remains the owner until the final payment, at which time, all contractual conditions satisfied, the hirer becomes the owner.
Important information included in hire purchase agreement contracts include;
• A description of the good/s hired;
• The rate of hire and interest;
• The total purchase price;
• Deposit details; and
• Rights under the contract.
Some hire agreements also include third parties, for example, in situations where a finance company is involved – the finance company buys the good/s outright from the owner, and the hirer pays the finance company instead of the original owner.