Techy Khushi

Jun 25, 2021

4 min read

Hire Purchase: Meaning, Features, Advantages and Disadvantages

Hire purchase is a method of financing of the fixed asset to be purchased on future date. Under this method of financing, the purchase price is paid in installments. Ownership of the asset is transferred after the payment of the last installment.

Features of Hire Purchase:

The main features of hire purchase finance are:

Advantages of Hire Purchase:

Hire purchase as a source of finance has the following advantages:

Disadvantages of Hire Purchase:

Hire purchase financing suffers from following disadvantages:

Term Used in Hire Purchase agreement;

Small scale companies and entrepreneurs can benefit from Hire Purchase. Expensive and important assets can be hired and later owned. This ensures that they can start using the asset from very first day and use the money earned to later buy the same assets.


Hire Purchase is an important source of financing in recent times. It provides a convenient way to afford and acquire assets that otherwise be financially unattainable. Thus, hire purchase also helps a nation’s economy to grow further. However, before entering an agreement, one should clearly understand the costs involved and the disclosures provided. There are various other like term loan and installment purchase which looks similar but there is the difference between hire purchase and term loan and also there is the difference between hire purchase and installment purchase.

Recommended Video

Thanks for taking out your time to read this blog . I hope you all must have gained some knowledge .

Thanks again.