Hire Purchase

A hire purchase is a method of buying goods through making instalment payments over time. The term “hire purchase” originated in the United Kingdom and is similar to rent-to-own arrangements in the United States. Under a hire purchase contract, the buyer is leasing the goods and does not obtain ownership until the full amount of the contract is paid.

The major benefit for any Businesses is to commonly employ this manner of leasing goods to enhance the appearance of earnings metrics. For instance, by leasing assets, it may be possible to keep the debt used to pay for the assets and the asset itself off the balance sheet, resulting in higher operational and return-on-asset (ROA) figures.