Hire Purchase Termination Rights

Hire purchase termination rights outline what the creditor and debtor are allowed to do to end a hire purchase agreement, sometimes called a conditional sale.3 min read

Hire purchase termination rights outline what the creditor and debtor are allowed to do to end a hire purchase agreement, sometimes called a conditional sale. When purchasing a car, a hire purchase (HP) allows the buyer to pay a deposit upfront and pay the rest over a specific timeframe. The buyer does not have to buy the car outright but will be subject to paying the interest rate of the hire purchase. After the final payment is made, the buyer then owns the car.

Hire Purchase or Conditional Sale Agreements

The most common use of a hire purchase or conditional sale agreement is with the sale of vehicles, although it used with furniture or white goods. This type of agreement is different from regular credit agreements because ownership of the vehicle, or other product, does not happen until the agreement has been paid in full.

If the buyer does not continue making payments, the creditor can repossess the goods. With credit agreements, you own the goods at the time the credit was received. The creditor in this situation cannot repossess the goods and can only request that payments be made as listed in the agreement.

The hire purchase or conditional sales agreement has a box labeled "Repossession." The details of your rights will be listed here, including how much you need to pay to prevent the creditor from repossessing the goods without the need for a court order if you fall behind on your payments. The amount is normally one-third of the total amount payable under the agreement.

Pros and Cons of Hire Purchase Agreements

The pros of using a hire purchase agreement include the following:

• Flexible repayment terms.
• Low deposit amounts at the time of purchase.
• Fixed interest rates.
• For some, the ability to return the car part way through the repayment period, based on how much as been paid.
• No final lump sum when the agreement ends.

The cons of using a hire purchase agreement include the following:

• Ownership doesn't exist until the final payment is made.
• If payments can't be made, the vehicle or goods can be repossessed.