Difference Between Hire Purchase And Installment

Difference Between Hire Purchase And Installment

The main dissimilarities or difference between hire purchase system and installment system can be pointed out as follows:

1. Meaning

Hire Purchase: System of buying goods by making regular payment until the full price is paid.

Installment: System of credit sale in which a sum of money or debt is paid regularly in installment.

2. Nature

Hire Purchase: It possess the nature of hiring

Installment: It possess the nature of selling

3. Ownership Of Good

Hire Purchase: Ownership of good remains with seller until the full price is paid

Installment: Ownership is transferred immediately after the first installment

4. Return

Hire Purchase: Goods can be returned to the seller before the final installment

Installment: Goods cannot be returned

5. Transfer

Hire Purchase: Buyer cannot transfer or sell the good until the final installment is made.

Installment: Buyer can sell or transfer the ownership of the good at any time.

6. Parties Involved

Hire Purchase: Generally, there are three parties involved:( i) seller, (ii) financing party and (iii) buyer

Installment: Two parties involved: (i) seller and (ii)buyer

7. Default In Payment

Hire Purchase: In case of default in payment, goods can be seized by the hire-vendor or seller

Installment: Goods cannot be seized in case of default in payment

Also Read:

Advantages And Disadvantages Of Hire Purchase

Features Of Hire Purchase System

Features Of Installment Purchase System

8. Repair And Maintenance

Hire Purchase: Seller is responsible

Installment: Buyer is responsible

9. Interest Rate

Hire Purchase: Flat rate

Installment: Interest is already included in the installment amount

Hire Purchase Vs Installment (Comparison Chart)

Basis For Difference	Hire Purchase	Installment
Introduction	Buying goods by making regular payment	Credit sale in which debt is paid regularly
Nature	Hiring	Selling
Ownership	Remains with seller	Transferred to buyer
Can Be Returned ?	Yes	No
Transfer/Sell	Buyer cannot sell the good before the final installment	Buyer can transfer the good to others
Parties	Seller, financing party and buyer	Seller and buyer
Default In Payment	Goods are seized	Cannot be seized
Repair/Maintenance	By seller	By buyer
Rate Of Interest	Flat rate	Added in the installment amount

I hope this post is helpful to understand the difference between hire purchase and installment system and to make comparison between them.

Main Differences