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HPS Theory

The document discusses hire purchase systems. [1] Hire purchase systems allow buyers to purchase high-value goods like cars and televisions through installment payments, with ownership transferring after the final payment. [2] Key terms include the cash price, hire purchase price (which includes interest), down payment, hire/installment payments, hirer (buyer), and hire vendor/owner (seller). [3] Main features are that the purchase is on credit, ownership remains with the seller until final payment, and the buyer has rights to use and terminate the agreement early.

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Siva Sankari
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77 views2 pages

HPS Theory

The document discusses hire purchase systems. [1] Hire purchase systems allow buyers to purchase high-value goods like cars and televisions through installment payments, with ownership transferring after the final payment. [2] Key terms include the cash price, hire purchase price (which includes interest), down payment, hire/installment payments, hirer (buyer), and hire vendor/owner (seller). [3] Main features are that the purchase is on credit, ownership remains with the seller until final payment, and the buyer has rights to use and terminate the agreement early.

Uploaded by

Siva Sankari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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HIRE PURCHASE SYSTEMS

INTRODUCTION

Hire purchase and instalment systems are responsible for bringing high value durable goods like cars, television into
the reach of middle class & lower middle class people. These systems have revolutionized the world of commerce.

Q. GIVE THE MEANING AND DEFINITION OF HIRE PURCHASE SYSTEM.

MEANING

Hire purchase system refers to that system where the buyer undertakes to pay the price of the goods bought by
instalments (which include interest) to acquire the possession immediately, but the title passes to the buyer only on the
payment of the last instalment. Usually, under the terms, a provision for payment of an initial amount on the date of
delivery is made. This means that the initial payment does not include any interest .This payment is usually known as the
‘Down payment’ or ‘initial payment’ or ‘deposit’.

DEFINITION

According to the Hire Purchase Act 1972 Section 2 (c) “Hire purchase agreement is an agreement under which
goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the
agreement and includes an agreement under which

i) Possession of goods is delivered by the owner thereof to a person on condition that such person pays the
agreed amount in periodical instalments.
ii) The property in goods is to pass to such person on the payment of the last of such instalments.
iii) Such person has a right to terminate the agreement at any time before the property so passes.

Q. STATE SOME IMPORTANT TERMS IN THE HIRE PURCHASE SYSTEM

1. Cash price-

This is the retail price of the articles at which they can be purchased immediately for cash.

2. Hire purchase price-

This is the total amount payable by the buyer, in agreed instalments for the goods purchased. This price includes
cash price and interest.

3. Interest-

This is the additional amount apart from the cash price payable by the buyer as compensation for postponed
payments.

4. Hire or instalment-

This is the amount payable by the buyer periodically. The instalments may be equal or different, depending on
agreement.

5. Down payment-
This is the advance payable by the buyer while signing the hire purchaser agreement. It is also a part of the hire
purchase price.

1. Hirer- The buyer of the goods on hire purchase basis.


2. Hire vendor or owner- The seller of the goods on hire purchase basis.

Q. ENUMERATE THE MAIN FEATURES OF HIRE PURCHASE SYSTEM.

 Purchase is on credit
 Purchase price is paid in instalment.
 Goods are delivered to the buyer.
 Buyer has right to use these goods.
 Ownership in the goods remains with the seller till the payment to last instalment.
 Hire purchases has a right to terminate the agreement at any time.
 If default is made in payment of instalment to the vendor he can take possession of the goods subject to legal
requirements.
 The goods sold under hire purchase system should not be for perishable commodities. Only fixed assets should be
sold under the system.
 Each instalment is treated as hire charges.
 If goods are repossessed, the value of goods on that date & the instalments paid are added & the total hire
purchase price is reduced. The balance is payable by the hire vendor to the hirer.

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