Terms You must know before starting this chapter
Hire Purchases Vs Credit Purchases
Section 2(1) Hire Purchase Act 1967 : The agreement which includes hiring of goods and at the same time giving an option to buy. It is a business transaction where by a seller allows a buyer to buy asset(s) by installments, based on interest rate charged.
Characteristics of Hire Purchase
The transaction is based on the rules of Hire Purchase Act 1967 and Hire Purchase Act (amendment) 1976.
- Right of the goods is still belonging to seller. The rights will be transferred at the end of the installment period. The owner will have a right to confiscate the assets if installment is not been paid by the buyer
- Interest rate will be charged on any balance from the payment in certain agreed period. The purposes of the interest rate are for additional administrative/management expenditure and to protect the goods from risk of damaged.
- A buyer will be informed on a cash price but if he/she wants to buy on hire purchase, instalment will be made for a certain agreed period.
- Deposit will be charged when the agreement is signed.
- Claim of goods. A buyer is assumed to hire the goods. If he/she intends to return/end the agreement, he/she can do so with condition that total installments will not be returned back. However, balances of the installment not need to be paid.
Other references :
Car Loan Calculator Malaysia | Calculator.com.my: Malaysia car loan calculator to calculate monthly loan repayments. Generate car loan estimates, tables and charts, and save as PDF file.
https://financialaccountingcoach.blogspot.com/p/hire-purchase.html
https://www.investopedia.com/terms/h/hire-purchase.asp
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