Question

Differentiate between the Hire Purchase system and the Installment payment system with four key points.

Hint:

In the \textbf{Hire Purchase system}, ownership transfers only after the final payment, while in the \textbf{Installment system}, ownership is transferred immediately after the agreement.

Answer 1

Concept:
The Hire Purchase system and the Installment payment system are two common methods of purchasing goods by making payments over time. Although both involve paying the price in installments, they differ in terms of ownership, payment structure, and rights of the buyer and seller.

Difference between Hire Purchase System and Installment Payment System:

Basis of Difference	Hire Purchase System	Installment Payment System
Ownership of Goods	Ownership remains with the seller until the last installment is paid.	Ownership is transferred to the buyer immediately after the agreement is made.
Right to Use Goods	The buyer (hirer) gets possession and the right to use the goods during the payment period.	The buyer becomes the owner and user of the goods from the beginning.
Right of Seller on Default	If the buyer fails to pay installments, the seller can repossess the goods.	The seller cannot repossess the goods once ownership has been transferred.
Nature of Agreement	It is considered a hiring agreement until the final payment is made.	It is a sale agreement where ownership passes immediately to the buyer.

Explanation:

Hire Purchase System:
Under this system, the buyer hires the goods and pays the price in installments. The ownership of the goods remains with the seller until the final installment is paid.

Installment Payment System:
In this system, the buyer becomes the owner of the goods immediately after the agreement is made, even though the payment is made in installments.