A
hire purchase, also known as a lease purchase, closed-end lease,
lease-to-own or rent-to-own, is a business arrangement between a seller
and a customer where the customer gets possession and use of the goods
in return for a fixed number of specified monthly payments, but the
seller retains ownership title rights until the customer has made the
final payment. At that point, ownership title passes to the customer.
A
hire purchase resembles an installment purchase, but with the crucial
difference that title to the property stays with the seller during the
hire term. The customer enjoys the economic benefits of ownership but
also assumes the risks of damage or loss. The seller is able to account
for the hire purchase as the equivalent of a sale. Normally, title to
the property passes to the customer at the end of the agreement's term,
but a hire purchase also can be structured so the customer takes
ownership after a final balloon payment.
