Hire purchases normally (not always) require you to put-down deposit amount of 10 percent of the car value. You then pay the remaining amount in multiple instalments, across a period of 1 to 5 years.
Hire purchases are arranged by car dealers; however, brokers may also offer such type of service. The charges are mostly quite competitive if the car is new, however less for secondhand vehicles.
The car finance is secured against it; thus you cannot own it till you make your final payment. Ensure to properly go through the terms & conditions of the finance prior to signing the agreement.
Hire purchase: Pros
Terms of repayment are often flexible repayment terms (starting from 1 to 5 years). Hence, they can easily fit in your monthly finances. However, if the term is longer, then you will need to pay more amount in interest.
The deposit required is often low (typically 10 percent of the vehicle’s value).
Interest rates are fixed. Hence, you exactly know how much you will be paying each month for the given term.
After paying half the vehicle cost, you might be allowed to return the vehicle & additional payments won’t be required.
Hire purchase: Cons
You will own the vehicle only after making your last payment.
The term length along with the deposit amount will impact your payments each month. The monthly installments are expected to be greater if the deposit amount & loan duration is less.
Until you have paid at least one third of the final sum payable the financier will have the right to reclaim the vehicle without the order from the court.
Making payments in a timely manner for the entire monthly installment amount is very essential with hire purchases. The financier has total right to repossess the car at any time before the payoff of the credit if payments aren’t received in timely manner & for the entire monthly payment.
Individuals with a good credit score & stable income can definitely benefit from hire purchases provided that they are confident enough to make the payments on time. Nevertheless, anybody who has faced troubles in making timely payments previously might want to consider other possibilities which offer slightly more flexibility in the installments.