Wednesday, February 24, 2021
Text Size

Hire Purchase vs. Cash

What is Hire Purchase?

Basically, hire-purchase is a method of acquiring assets or products without the need to invest the full amount of money in buying them.

Advantages of Hire Purchase:

  • You can gain immediate use of the item without paying all the cash at once. 
  • You get to buy the items that are essential but financially out of your reach.

Disadvantages of Hire Purchase:

  • You don't own the item until you've paid all the money. This means that you can’t modify or sell the item without the permission of the seller.
  • Your contract is with the seller who will own the item until the final payment is made.
  • The seller might be permitted to take back the item if you do not keep up to date with your payments.
  • You are liable for any damages caused.
  • You end up paying more for the item in the long run than you would have if you purchased it with cash.

Cash Purchases

It is better to plan ahead when deciding to purchase an item that will cost you a lot of money. Decide if this item is necessary or not. If it is, and you have some time before you need it, you can save the installments that you would have been paying for the item if you bought it on hire purchase.

Remember that Hire Purchase is another form of debt.

Check the Fees and Charges

Most hire purchase or credit sales agreement require you to pay charges and fees. You may not notice you are paying these fees as they may be added to the debt you have with the seller.

Before you buy an item ask yourself: do I really NEED to buy it NOW?