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Hire purchase involves an arrangement made for expensive consumer goods in which the buyer makes an initial down payment then pays the balance with interest in installment. This is a business transaction that is effective for individuals or companies in need of expensive consumer goods and products. Hire purchase is effective because the consumer reaches an agreement with the seller and hence reduces the purchasing pressure. On the other hand, the seller gets a profit from the interest rate over the repayment period. However, in hire purchase, one does not officially gain ownership of the merchandise when the contract is signed, but until the payment is completed. 

Fraud in Hire Purchase

There is a similarity between rent-to-own transactions and hire purchase. The similarity comes in the sense that the lessee can buy the merchandise at any time during the agreement. However, such options, as much as they are attractive on paper, are several related turn-offs. Fraud in hire purchase has been witnessed. This has affected the business, and the need to recover the items after the payment agreement is revoked.  Cases as a fraudster using another person’s identity and financial details to buy merchandise on hire purchase have been witnessed. This is why, as a seller having the right avenue to ascertain the buyer's credential before signing the agreement is called. Understanding the risks involved in hire purchase should be understood by both the seller and the buyer.

Risks Involved in Hire Purchase

Some hire purchase transactions could go south, take an instance when the purchaser defaults on installments.  There are many reported cases of retailers taking back their goods from defaulting customers. The fact is that the Hire purchase act allows sellers to repossess the property to recover arrears.   Purchasers are allowed to terminate the transaction when they experience payment difficulties. They should do so through a notice in writing to the retailer. The tricky part of this arrangement is that the goods must be as good as new. Returning them in poor condition may attract a suit seeking damages from the retailer. Instances, where repossession occur include when;

The hire purchase contract gives the seller the right to repossess an item

The purchaser has defaulted, according to the terms of the contract

The contract is breached in some way

The seller has reasonable grounds to believe the items will be destroyed, damaged or removed

The seller is registered as a financial service provider.


Hire purchase provides the right avenue for an individual to buy the right item in the market. This is a rent-to-buy process that can work well. However, there are several disadvantages and risks to hire purchase that one should know. The information on such risks is vital to both the retailer and the buyer. 

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