What is Hire Purchase

A hire purchase agreement is an arrangement for buying goods, where the buyer makes an initial down payment and pays the balance plus interest in instalments.

Hire purchase agreements give you the option the buy at any time during the agreement.  Hire purchase can benefit customers with poor credit by spreading the cost of expensive items that they would otherwise not be able to afford.   It is important to note, that you will not own the item until all payment instalments are made.

Advantages of Hire Purchase

  • Allows for the purchase of high value items
  • Prevents a large outlay of cash
  • Allows you to spread the cost of your purchase
  • The interest rate is fixed
  • There is an option to pay off the loan early (fees may apply)

Disadvantages of Hire Purchase

  • Overall, the cost of the product is higher due to interest payments
  • Ownership does not transfer until all payments are made
  • Monthly payments are based on individual credit rating
  • Missing or late payments could impact your credit score
  • The item can be repossessed if you do not keep up your repayments.

There are both advantages and disadvantages to all financial decisions.  Although hire purchase can be a great option to allow you to make that purchase, it is not always right for everyone.  Before deciding whether a hire purchase is the right option to finance your purchase, it is important to weigh all the advantages and disadvantages alongside your own personal and financial circumstances to ensure that you choose the best option for your needs.


  • Hire purchase is an agreement where the buyer makes a down payment and pays the balance plus interest in instalments.
  • These types of agreements are generally used for very expensive goods.
  • Hire purchase agreements are not seen as an extension of credit.
  • In a hire purchase agreement, ownership is not transferred to the purchaser until all payments are made.
  • Hire purchase agreements usually prove to be more expensive in the long run than purchasing an item outright.