Difference between hire purchase system and instalment payment system

Asked by admin @ 23/08/2021 in Accountancy viewed by 476 People

Difference between hire purchase and instalment payment system

Answered by admin @ 23/08/2021

Answer:

1. Meaning

Hire Purchase: System of buying goods by making regular payment until the full price is paid.

Installment: System of credit sale in which a sum of money or debt is paid regularly in installment.

2. Nature

Hire Purchase: It possess the nature of hiring

Installment: It possess the nature of selling

3. Ownership Of Good

Hire Purchase: Ownership of good remains with seller until the full price is paid

Installment: Ownership is transferred immediately after the first installment

4. Return

Hire Purchase: Goods can be returned to the seller before the final installment

Installment: Goods cannot be returned

5. Transfer

Hire Purchase: Buyer cannot transfer or sell the good until the final installment is made.

Installment: Buyer can sell or transfer the ownership of the good at any time.

6. Parties Involved

Hire Purchase: Generally, there are three parties involved:( i) seller, (ii) financing party and (iii) buyer

Installment: Two parties involved: (i) seller and (ii)buyer

7. Default In Payment

Hire Purchase: In case of default in payment, goods can be seized by the hire-vendor or seller

Installment: Goods cannot be seized in case of default in payment

8. Repair And Maintenance

Hire Purchase: Seller is responsible

Installment: Buyer is responsible

9. Interest Rate

Hire Purchase: Flat rate

Installment: Interest is already included in the installment amount

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