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Simple English definitions for legal terms
hire-purchase agreement
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A quick definition of hire-purchase agreement:
A hire-purchase agreement is when someone wants to buy something but can't afford to pay for it all at once. They can take possession of the item by making the first payment and then pay for it in installments. Once they make the final payment, they own the item. This is often used for things like equipment or furniture. It's like renting something, but with the option to buy it in the end.A more thorough explanation:
A hire-purchase agreement, also known as a lease-purchase agreement, is a type of rent-to-own purchase plan. It allows the buyer to take possession of the goods with the first payment and take ownership with the final payment. This type of agreement is commonly used for equipment or property leases.
For example, a small business may enter into a hire-purchase agreement for a new piece of machinery. The business would make regular payments to the leasing company, and once the final payment is made, ownership of the machinery would transfer to the business.
It's important to note that under a capital lease, the lessee is responsible for paying taxes and other expenses on the property. This type of lease is usually treated as an installment sale.