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Hire Purchase

Hire Purchase enables the customer to pay for a vehicle purchase over a set period of time and take ownership of the goods once all repayments have been made in full. Customers put down an initial deposit and then make monthly payments for a fixed period – typically two to five years – at the end of which they become the legal owner of the car. Transfer of ownership may require a relatively small document / title transfer fee. The more deposit you put down on a hire-purchase deal, the lower your monthly payments are and vice-versa. With hire purchase, it may also be possible to become owner of the car earlier than agreed by making a lump-sum payment for the remainder of the loan, based on a settlement figure.

What are the advantages of hire purchase?
Allow motorists to spread the cost of buying a vehicle rather than having to find all the cash up front.
No final 'balloon' payment to take ownership
No mileage restrictions
Fixed payments repayments

What are the disadvantages?
Failure to keep up with monthly repayments means that the vehicle can be repossessed, as it is used by the finance provider to secure the loan.
You do not own the car until the final instalment – plus any final transfer fee – has been paid.
Customer bears the risk of negative equity if the vehicle’s value depreciates faster than expected.
Customer is responsible for sale of the vehicle, and any shortfall owed to settle their hire purchase agreement, if they wish to change their vehicle.

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