Question

Give any four points of distinction between the hire purchase system and the installment system of selling.

Answer 1

Hire Purchase System:

• It is a system by which the seller agrees to sell the articles to the buyer on the condition that the payment of the article will be made in a fixed number of instalments till the sale price is paid.
• Though the buyer gets possession of the goods immediately on signing the contract the ownership does not pass on till the payment of the last instalment.
• The buyer prefers to pay a lump sum or a part of the price initially i.e., down payment and the balance in instalments as per the contract.
• The seller continues to be the owner of the article till then.

Installment System:

• An instalment system is a type of purchase in which the price amount of the product is not paid initially but in instalments.
• Title or ownership of articles as well as possession is passed on to the buyer as soon as the first instalment is paid.
• It is also called a deferred payment system.
• On default of payment, the seller cannot seize the article but recover the dues through court.