Advantages and disadvantages of Hire Purchase to the buyer

Advantages to buyer

• There is no need for the buyer to raise the full purchase amount at once.
• The buyer can use the goods while paying for them.
• The profits generated from using the good(s) e.g. Welding machine during this period can be used to pay the goods’ installments.
• Allows people to buy expensive items.
• Goods are under guarantee during the Hire Purchase period.
• Customers can enjoy higher standards of living.
• Enjoys legal protection during the Hire Purchase period.

Disadvantages

• May encourage customers to overspend and buy on impulse.
• Goods are more expensive when compared to cash buying due to additional Finance charges that have to be paid.
• The seller may repossess the goods if the buyer fails to pay installments.
• In the event of repossession the customer is not compensated.
• The goods cannot be used as collateral during this period.
• The customer does not own the goods during Hire Purchase period.

To access notes of the advantages and disadvantages of Hire Purchase to the seller go to this page.

To access notes on the characteristics of Hire Purchase go to this page.

To access more topics go to the Commerce Notes page.