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Hire Purchase VS. Leasing – The Tools for Battling Inflation 

Jul 27 2022

With the exponential rise in prices, it is understandable why more people are going the hire purchase and leasing route as opposed to paying for products in one go. Most people have no other choice but to find alternatives to maintain their current lifestyle. 

After all, if replacing the faulty refrigerator would mean walking everywhere for a month because you are out of gas money, then you may prefer getting it through hire purchase. You get to use the item while you pay for it in installments, and it is yours when the payments are all made, making it an extremely convenient option. On the other hand, leasing a refrigerator would mean you get to use it but never own it. Read along to learn more about the two possibilities and what sets them apart.

What is hire purchase and its features?

Hire purchase basically means paying for consumer goods with an initial down payment that is followed by monthly installments. Since you are paying for an item in parts, the total amount is higher than the original value; in other words, there is interest involved. So, for example, if you buy a product worth $1000 via hire purchase, the owner might ask for $1700.

Here’s the hire purchase formula that’s commonly used: deposit + total monthly payments

If you are looking to buy something expensive, this payment method comes in handy. It is easy to understand and does not involve a ton of calculations. 

If you are thinking that hire purchase is quite similar to installment plans, then you are not off the mark. However, there is a point where the similarities end. With hire purchase, you get access to the goods after making the down payment, but the ownership is handed over after all the payments are transferred. On the contrary, according to some installment plan agreements, the buyer gets ownership of the product at the very beginning. 

The act of hire purchase is beneficial not only to the hirer but the hire as well. Since the ownership is withheld until the completion of payment, the seller has the power to repossess the item, in the case of missed installments. 

Hire purchase proves to be advantageous for a lot of businesses, too, especially if they lack capital. If you are an up-and-coming business or a freshly-launched startup that needs new machinery or another asset but do not have enough cash to pay for it at once, then hire purchase is the way to go. You will not only get what you want, but it will also be yours after a certain amount of time. This is also great when you do not have enough collateral to get a line of credit. 

Pros and cons of hire purchase 

Now that you know the meaning of hire purchase, it might be good to assess the advantages and disadvantages. 

The benefits

  • First and foremost, hire purchase enables you to upgrade to the latest products rather easily. The finer things are no longer out of reach. 
  • You are able to afford expensive consumer goods without going over budget or putting a dent in your savings. 
  • Following the down payment, you get to use the item to your liking even before all the installments are made. There is no waiting involved. 
  • By the end of the agreement period, if you have been able to keep up with the monthly installments, you become the legal owner of the item in question. 
  • Hire purchase does not come with a plethora of restrictions when it comes to using the product since you are going to own it eventually, unlike a lease or renting situation. 
  • You have the liberty to pay off all the installments before the agreed-upon time for early possession. 
  • This form of payment does not require you to have a perfect credit score. 

The drawbacks

  • Since you are paying for a good in parts as opposed to buying it outright, hire purchase comes with interest. This means you are paying more than the retail value in the long run. 
  • An extended agreement period would mean smaller installments, but it would also mean paying more in interest. 
  • While your credit score does not affect your eligibility for hire purchase, it does play a significant role in deciding the interest rate. A bad score typically equates to a higher rate. 
  • Despite having possession of the good, you are not eligible to sell it until all of the money has been paid off. 

What is leasing? 

You must have heard phrases like leasing a car or leasing my apartment; allow me to shed some light on the meaning of lease. 

A lease allows you to rent an object for a certain period of time, during which you pay a fixed amount to the actual owner on a monthly basis. The person getting temporary access to the good is known as the lessee, and the owner is known as the lessor. 

There are many possibilities available, from leasing property and cars to leasing machinery. 

Just like in the case of any other legally-binding agreement, breaking a lease contract in any way can have serious consequences for the party at fault. Breaking a lease without prior notice can land you in hot water. It might become challenging to lease something in the future, or you might end up losing the security deposit. 

A lot of lease agreements come with early termination clauses that prove to be beneficial for the lessee, especially in long-term situations. One such clause is about the inability of the lessor to maintain the quality of the good in question; this gives the lessee an opportunity to end the lease before the decided-upon period is over. 

The difference between hire purchase and leasing 

The chief distinction between the two is regarding the ownership of the product. By the end of a hire purchase agreement, you get ownership of the product, so there is no need to extend the agreement if you wish to keep using it. On the other hand, a lease implies that you are renting an object, and by the end of the time period, you either return it or request an extension. 

The monthly amount you pay in case of hire purchase includes interest, while lease installments are typically free of interest. 

Now whichever one you choose depends on the need of the hour. If you require something for a brief period of time, then leasing it might be the way to go. If you need an item permanently but cannot afford to pay for it upfront, hire purchase makes for a suitable alternative. 

Buy now, pay later and Atome

One cannot discuss convenient payment methods without including the buy now, pay later services.

One such application that allows you to pay for your purchase in smaller amounts is Atome. It is a cutting-edge program that aims to make products and services more accessible for its users. 

Atome review

  • Choosing Atome as the payment method splits your bill into three smaller payments that are then paid at scheduled intervals. 
  • Said payments are free of interest, and you are only supposed to pay off the exact amount that was spent. 
  • Paying with Atome gives you the liberty to invest in expensive items without having to worry about going over your monthly budget.
  • You get complete access to the purchased item after the initial payment. The application automatically charges each payment to the linked credit or debit card. 
  • Users are not charged extra money in the name of service or additional charges. Downloading the app (get it here) and signing up for it are free. 
  • Atome is affiliated with over 10,000 local and international brands, which means you can conveniently pay for almost every other product and service out there. 
  • The best part is that this user-friendly application can be used to pay for your online and in-store shopping haul. 
  • Users are eligible for a myriad of exclusive discount vouchers and promotional codes at various partner brands. 
  • New members receive a discount voucher worth $10 on their first purchase made with Atome. 
  • Missing a payment results in the suspension of your Atome account until all the dues are cleared. Under such circumstances, you are also required to pay an administrative fee. 
Scan QR to download the Atome app
Scan QR to download the Atome app

Thoughts

Inflation is a very valid, very real concern but feasible payment methods like these make it possible for us to continue affording various necessities and luxuries. While hire purchase and lease are great options, Atome remains my favorite. You can use it to pay for a boatload of items without being charged any interest. Download the fantastic app now and get shopping!

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