Difference Between Hire Purchase And Ordinary Hiring Agreement

ConclusionIn the essence, the lease purchase system is suitable for buyers who need the asset for a short time or who are not sure of the long-term needs. The asset return cushion gives them that leverage. The tempering system is useful for those who are sure to use the asset up to its service life and for those who are able to take responsibility for the asset in terms of repairs and maintenance and wear. A rental purchase (HP), [1], also known as a installment payment or nie-Nie, is an agreement in which a customer accepts a contract to acquire an asset by paying a first instalment (for example.B. 40% of the total) and will repay the balance of the asset price plus interest over a period of time. Other similar practices are described as closed-end leasing or rent to own. It is strongly discouraged to use leases as a kind of off-balance sheet financing and is not in accordance with General Accounting Principles (GAAP). 4. In the event of a sale, the seller runs the risk of any damage resulting from the insolvency of the buyer. In case of purchase of rental, the owner does not take such a risk, because if the tenant does not pay a measurement, the owner has the right to take back the goods. 3.

In the event of a sale, the buyer cannot withdraw from the contract and is obliged to pay the price of the goods. On the other hand, in case of purchase of rental, the tenant may, if he wishes, terminate the contract by returning the goods to its owner, without being obliged to pay the remaining measurements. Lease purchase agreements are generally more expensive in the long term than a full payment for the purchase of assets. This is because they can have much higher interest costs. For businesses, they can also involve greater administrative complexity. Until that date, the tenant remains the guarantor and the payments he has paid are considered as rental fees for the use of the goods. In case of delay of the tenant in the payment of a measurement, the owner has the right to immediately resume possession of the goods without refunding the amount received until then, since the property still belongs to him. The essence of the lease agreement is therefore that there is no purchase agreement, but only a guarantee of the goods, in combination with a call option that may or may not be exercised. The right of sale or transfer is always exercised by the owner of the assets. In the case of the rental purchase, this right belongs to the finance company or.dem seller, who owns the asset. In the case of the tempered purchase, it is with the buyer, because he becomes the owner on the day he signs the contract.

2. In the case of a rental purchase, there are 3 agreements, namely between the (a) seller and the financier. (b) financiers and buyers and (c) buyers and sellers. But for the sale at tempes, there is only an agreement between the buyer and the seller. If the seller has the resources and legal right to sell the goods on credit (which normally depends on a licensing system in most countries), the seller and the owner are the same person. However, most sellers prefer to receive a cash payment immediately. To do this, the seller transfers ownership of the goods to a financial company, usually at a discounted price, and it is this company that rents and sells the goods to the buyer. This introduction of a third party complicates the transaction.

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