Hire Purchase/Lease Purchase Agreement

Hire Purchase is a contract of Hire with an option for the hirer to aquire title to the goods at the end of the agreement. Usually the Hirer is given an  "option to purchase" the goods for a nominal amount which is added to the final instalment.

Lease purchase is a fashionable name for hire purchase.The instalments may well be based on a profile similar to a lease agreement but the hirer has the right to purchase the goods at the end of the agreement.

(The instalments do not attract VAT.)

Loan Agreement.

This is an unrestricted form of credit where the debtor is granted a facility to buy goods or services of his chioce.

The borrower takes immediate ownership of the goods he purchases.

(Instalments under a loan agreement do not attract VAT)

Lease Agreement.

 This is a contract of Hire only.The parties to a lease agreement are the lessor ( the finance company who purchase and own the goods) and the lessee (the customer who has use of the goods during the period of the lease).

One thing distinguishes leasing agreements from any other type of finance contract and that is :-  the separation of USE from OWNERSHIP.  The lessee cannot take ownership of the goods from the lessor as the contract is one of HIRE. There are no rights of ownership, or options to purchase the goods, given to the lessee at the end of the agreement. The goods remain the property  of the Finance Company.

(Leasing rentals attract VAT at the current rate)