Advantages and disadvantages of Hire Purchase to the seller

Details shown on Hire Purchase goods

• A description of the goods.
• The cash price of the goods.
• The total Hire Purchase Price i.e. the cash price + the relevant finance charges
• The required deposit amount.
• The amount and number of installments required.
• The finance charges.

Advantages to seller.

• Increases sales and thus profits.
• It encourages impulse buying.
• They get commission from Finance Houses.
• Insurers good during the Hire Purchase period.
• The seller has the right to repossess the goods if the buyer defaults on payment.

Disadvantages

• Capital is tied up in the form of debts.
• Repossessed goods may not be fit for resale.
• Increases the risk of bad debts.
• Increased clerical work is required to administer Hire Purchase sales.
• Bad publicity can ensue from suing defaulters.

To access notes of the advantages and disadvantages of Hire Purchase to the buyer 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.