Accounting Terms in a Nutshell: Hire Purchase agreements
Popular: Hire Purchase remains a popular option for motorists. Image by 279 Photo Studio (via Shutterstock).
For some people, Hire Purchase offers an easy way of getting a new television set, furniture, or a car. It has also been known as easy terms, the drip, or the never never. Its popularity, since the late 1950s, rose hand in hand with consumerism. That of needing our worldly goods this very moment, instead of waiting till we’ve saved enough to pay in full.
Hire purchase rates depend on your credit history and the length of your payment. You can be rewarded with a lower APR for paying in six months, compared with a customer who is paying for the same item over three years. Once you have made the final payment, the item is yours to keep. Whilst you keep up the payments, it is owned by the finance company who has dealt with your application.
Today, with a lot of electrical appliances being cheaper than their equivalents thirty years ago, fewer people take out H.P. agreements. Television sets are more likely to be purchased instead of rented (today’s sets are more reliable; renting was popular due to early sets being unreliable). Hire Purchase is a popular option for buying new or used cars, though not the only option available to motorists.
In our series of Accounting Terms in a Nutshell related infographics, we focus on Hire Purchase. Feel free to share the infographic, so long as you give us a credit.