Hire Purchase Agreement

Overview of Hire Purchase Agreement
The hire purchase agreement is one of the main constituent parts of a lease. With an increasing number of companies opting to lease instead of buying assets for business related purposes, the hire purchase agreement is becoming more important than ever before.

Features of Hire Purchase Agreements
The entire interest that is accumulated by the hiree is distributed. This distribution is done on the basis of method sum of the years digits.
The counterpart of the lessor or the hiree buys a particular property. He then provides the hirer or the counterpart of the lessor the property on a rental basis.
The hiree usually takes a flat rate of interest. This means that a specified portion of the interest rate is calculated on the basis of the investment made at the beginning by the hirer. The figure is normally around 14 percent. The interest rate is not taken on the basis of diminishing balance.
The hirer is supposed to pay the hiree a certain number of installments at time periods that are fixed. These installments are supposed to account for the payment of the principal as well as the interest. At the time when the final installment is paid by the hirer the ownership of the asset is transferred to him.


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Last Updated on : 27th June 2013

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