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What is the advantages and disadvantages of Hire Purchase System?

Hire Purchase System: Under this system the purchaser purchases the goods on instalment and after paying the last instalment he become owner of that goods until the ownership is in the hand of seller and he has a right to forfeit that goods if the purchaser fails to pay any instalment. The seller paid all maintenance expenses until the the ownership is in his hand. The purchaser has to pay some cost of a goods  immediately to seller which is known as down payment. From next month his instalment periods will be started and he has to pay agreed amount with interest to seller.In the agreement the purchaser is known as hire-purchaser and seller is known as vendor.

Advantages of hire-purchase system:
·        Hire-purchaser can purchase the luxurious goods in easy instalments.
·        The instalments are not create burden on purchaser's financial position.
·        The seller or vendor  has a right to forfeit the goods if hire-purchaser does not pay its instalment.
·        The sellers or vendor are able to sell more goods by using hire purchase system.
·         It increases the demand and supply of costly goods.
·        The ownership is in the hand of seller or vendor until the hire- purchaser does not make the full payment of that goods.

Disadvantage of hire-purchase system:
·        The hire purchaser is not entitled for ownership until he paid the last instalment.
·        All expenses paid by seller or vendor until the purchaser pay all his instalments.
·        If the purchasers buy the luxurious goods which they normally are not able to buy it and if they fail to pay the instalments then seller suffers loss.
·        The seller suffers loss when the purchaser is not able to pay any instalment and the goods return back to seller’s hand in bad condition because he doesn’t has to pay any maintenance expenses so, the purchaser uses freely.

Right of Seller or Vendor on seize of goods:

If the purchaser has paid the definite proportion of goods value to seller then the seller has no right to seize that goods because the goods are now treated as protected goods and he can recover the remaining amount from purchaser by submitting application in the court.

Right of Hire-Purchaser on seize of goods:

If the seller seizes the goods then hire purchaser has a right to recover the amount from seller that is the amount paid up to the date of seizing the goods and the value of goods at the date of seizing the goods.

Termination of the hire purchase agreement:

The purchaser has an option to terminate the hire purchase agreement at any time but before the last instalment is become due. In that case he has to give 14 days notice to seller. He has to pay agreed amount to seller for terminating the contract as decided between them. But if he has paid more or equal of agreed amount prior of terminating the contract to seller then he will not pay any amount to seller.




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