Question

Identify, which of the following statements correctly describes the hire purchase system?

• A. The buyer becomes the owner of goods immediately after taking possession.
• B. The buyer pays the full price in lump sum at the time of purchase.
• C. The buyer gets possession of goods immediately but ownership is transferred only after the last instalment is paid.
• D. The seller cannot repossess the goods in case of default.

Hint:

In hire purchase, think about who owns the goods while instalments are still pending.

Answer 1

The Correct Option is C

Step 1: Understand the term:
Hire purchase is a way of buying costly goods such as a car, a refrigerator or a machine without paying the whole price at once.
The buyer pays the price in instalments over a fixed period. The instalments include some interest.

Step 2: Recall the main features:
1. The buyer gets possession of the goods on the first day and can use them.
2. The ownership stays with the seller until the last instalment is paid.
3. If the buyer fails to pay an instalment, the seller can take the goods back. This is called repossession.
4. Instalments paid earlier are usually kept by the seller as hire charges.

Step 3: Check option (A):
The buyer does not become the owner when he takes possession. He becomes the owner only after the last instalment. So (A) is wrong.

Step 4: Check option (B):
Paying the full price at the time of purchase is a cash purchase, not hire purchase. So (B) is wrong.

Step 5: Check option (C):
This states both main features: immediate possession and ownership after the last instalment. So (C) is correct.

Step 6: Check option (D):
The right to repossess goods on default is a key protection for the seller in hire purchase. So (D) is wrong.

Final Answer:
Option (C) is the right description of hire purchase. \[ \boxed{\text{Option (C): Possession at once, ownership after the last instalment}} \]