Hire Purchase And Installment Payment Accounts - Definition & Types of Goods On Hire Purchase - SS3 Accounting Lesson Note

Hire purchase is a type of financial agreement in which a person or business agrees to purchase goods on credit, with the option to buy the goods outright after making a series of regular payments. The buyer takes possession of the goods at the beginning of the agreement, but does not fully own the goods until the final payment is made.

There are two types of goods that can be purchased on hire purchase, and they include:

• Consumer goods: These are goods that are purchased for personal or household use, such as furniture, electronics, and appliances.

Commercial goods: These are goods that are purchased for business use, such as machinery, vehicles, and equipment.

In a hire purchase agreement, the buyer typically makes a down payment and then pays off the remaining balance in installments over a set period of time. The buyer is responsible for insuring and maintaining the goods during the term of the agreement. Once the final payment is made, the buyer owns the goods outright and the agreement comes to an end.

Hire purchase agreements can be a convenient way to acquire goods without having to pay for them upfront, but it's important to carefully read and understand the terms of the agreement before signing on the dotted line.