myz-vgb.ru A Business Encyclopedia

Hire-Purchase

Definition: The Hire-Purchase is a kind of a lease agreement wherein the hiree, the counterpart of lessor purchases the asset and gives it on hire to the hirer, the counterpart of the lessee in exchange for the fixed number of periodical installments inclusive of the interest amount and the principal amount.

In the case of a Hire-purchase agreement, the hirer is supposed to pay interest along with the principal amount. The interest is usually charged on the amount initially paid by the hiree on the purchase of the investment and not on the diminishing balance. It differs from the traditional lease agreement in one of the following forms:

  1. In the case of a hire-purchase agreement, the hirer can claim depreciation for the tax purposes while in the case of a lease agreement the lessee cannot claim any depreciation.
  2. Only the interest component in the hire-purchase installment is tax deductible, whereas, in the case of the lease agreement, the entire lease rent is tax deductible.
  3. One of the differences between hire-purchase and the lease agreement is that, in case of the former type the hirer is the owner of the property and hence, enjoys the salvage value of the asset, while in the latter form, the lessee is not the owner of the property and thus, do not enjoy the salvage value.

Thus, in the case of a hire-purchase, the possession of property gets immediately transferred to the hirer, and the payment for the same is made in an equal number of installments. But however, the ownership of the property gets transferred only with the payment of last and final installment. A car purchase is a very good example.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


what is multistage random samplingdefinition of scatter diagramivan pavlov conditioningmotivation theory vroomdp meaning in financedefinition ethnocentricityaccounting profitability ratiosmeaning of pricing strategycobb douglas equationpricing and costing methodsdebentures definebrandmark definitionthe classical theory of inflationcredit turnover ratio formulalpp examplesoperating profit margin ratiotrait theroyguerrilla war definitionstability defduality in lppfreudian theory definitionhr demand forecastingdefinition of elastic goodsdefine econometricliability wikipediahow to find a stratified samplecob douglas functionwhat is a sales projectionbackward vertical integration definitioncommunication barriers wikipediarowan plan formulamemorandum of association and its clausesfactors that influence price elasticity of demandnational savings certificatestock split meaningspeculative trading definitionwhat is the meaning of kioskdifferent types of indifference curvesdefinition intervieweeformula for capmtravelers chequefirms in monopolistic competitionformula for operating profit marginfactors affecting marketing environmentdefine a debenturesegmentation strategy definitionrural marketing strategydefine jitpoison pill definitionwhat is management according to henri fayolconsumer behavior and utility maximizationprinciple of fayoldefine law of diminishing marginal utilitydebenture definedefine liquidity ratioscalculate profitability indexmonopolisitc competitionwhat is nnp in economicsdefinition of accounting ratiospearson coefficient of correlation formulachronic unemployment meaningcollective bargaining conceptdegrees of price elasticity of demand with examplesmonopoly in economics definitionblack scholes stock option calculatorwhat is slr ratearises meaning in hindidefinition franchisingdefinition of demographic segmentationblake and mouton leadershippavlov's theory of classical conditioningpost office nsc schemeconversation between interviewer and interviewee