Difference between Hire Purchase and Installment Purchase

When the buyer of goods has not enough money to pay for the purchase, he or she may go for either hire purchase or installment purchase and pay money for the purchase in installment; however before going for it he or she must know the differences between the two. Let’s look at the differences between hire purchase and installment purchase –

1. In hire purchase the ownership of the goods passes to the buyer on the payment of last Installment while in case of installment purchase the ownership of the goods passes to the buyer immediately.

2. In case of hire purchase the buyer can return the goods to the seller if he or she does not want to continue with the agreement which is not possible in case of installment purchase.

3. In case of hire purchase agreement if the buyer makes default in payment of Installment the seller can have his or her goods back while in installment purchase the seller can only bring a claim against buyer but cannot have his or her goods back.

4. Since under installment purchase the ownership of goods passes to the buyer immediately he or she can transfer the goods to third party which cannot be done in case of hire purchase.

Hence from the above one can see that there are many differences between hire purchase and installment purchase and buyer should carefully analyze both the option before deciding whether to go for hire purchase or installment purchase.