Current Hire Purchases
<p ><b>Hire purchase</b> (abbreviated (<b>HP</b>) <sup id="cite_ref-1" class="reference" ><a href="https://en.wikipedia.org/wiki/Hire_purchase#cite_note-1" >[1]</a></sup> this is an arrangement whereby a company acquires an asset by paying an initial installment (e.g. 40% of the total) and repays the other part of the cost of the asset over a period of time or term for a contract, in which a purchaser agrees to pay for goods in parts or a percentage over a number of months. In <a href="https://en.wikipedia.org/wiki/Canada" title="Canada" >Canada</a> and the <a href="https://en.wikipedia.org/wiki/United_States" title="United States" >United States</a>, a hire purchase is termed an <b>installment plan</b> although these may differ slightly as in a hire purchase agreement the ownership of the good remains with the seller until the last payment is made. Other analogous practices are described as <a href="https://en.wikipedia.org/wiki/Closed-end_leasing" title="Closed-end leasing" >closed-end leasing</a> or <a href="https://en.wikipedia.org/wiki/Rent_to_own" class="mw-redirect" title="Rent to own" >rent to own</a>.
The hire purchase agreement was developed in the <a href="https://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom" >United Kingdom</a> in the 19th century to allow customers with a cash shortage to make an expensive purchase they otherwise would have to delay or forgo. For example, in cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a <a href="https://en.wikipedia.org/wiki/Down_payment" title="Down payment" >deposit</a>, a hire-purchase contract allows the buyer to hire the goods for a monthly <a href="https://en.wikipedia.org/wiki/Renting" title="Renting" >rent</a>. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner.
If the buyer defaults in paying the installments, the owner may repossess the goods, a vendor protection not available with unsecured-consumer-credit systems. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period. Business consumers may find the different <a href="https://en.wikipedia.org/wiki/Balance_sheet" title="Balance sheet" >balance sheet</a> and <a href="https://en.wikipedia.org/wiki/Tax" title="Tax" >taxation</a> treatment of hire-purchased goods beneficial to their taxable income. The need for HP is reduced when consumers have collateral or other forms of credit readily available.
These contracts are most commonly used for items such as car and high value electrical goods where the purchasers are unable to pay for the goods directly.</p>