Hire Purchase

Business, Legal & Accounting Glossary

Definition: Hire Purchase

Quick Summary of Hire Purchase

This refers to when equipment used by the business is paid off through a finance company. At the end of the lease period the company can pay a final fee to own it or start payments for a new piece of equipment.

What is the dictionary definition of Hire Purchase?

Dictionary Definition

Hire Purchase is a system by which one pays for a product in regular instalments while having use of it.

A method of purchasing an item, where the buyer hires it and takes possession of it and pays regular instalments. Ownership is only transferred on payment of the final amount. Abbreviated as HP.

Full Definition of Hire Purchase

Also known as ‘conditional sale’, a Hire Purchase (HP) agreement is a loan linked to a specific purchase, such as a car, a furniture suite, etc. It is effectively a means of obtaining the use of an asset before payment is completed.

An HP contract involves an initial, or ‘down payment’, thereafter you ‘hire’ the item you are buying for a fixed period, during which time you pay for it in monthly instalments, plus interest.

As the purchaser, you won’t own whatever you’re buying on HP until you complete the payments – fail to do so and the company that has arranged the HP agreement will be within its rights to repossess the asset in question. Although legal title only passes at the end of the term, for tax purposes, the customer is regarded as the owner from the outset.

Examples of Hire Purchase in a sentence

We’re buying the new company car on hire purchase.
Hire purchase is now available for new commodities such as electric cars.
The average consumer owes more than £6,300 through personal loans, credit cards and hire purchases.
There are four key methods of funding: cash purchase, bank overdraft, hire purchase and leasing.
The court determine the purchaser was unaware of any preceding hire purchase agreement.
Before the days of credit cards, hire purchase was king.
Industrial Hire Purchase is fundamentally the same as hire-purchase for personal customers but instead solely applies to capital equipment.
There were the hire purchase repayments to be made on the kitchen equipment and the company car, not to mention a mortgage on the actual premises.
The authorities could limit the availability of credit for hire purchases by either specifying larger minimum deposits or shorter maximum repayment periods.

Synonyms For Hire Purchase

leasing, layaway, consumer credit, rental with purchase option, lease purchase, HP

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Hire Purchase. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 18, 2021 https://payrollheaven.com/define/hire-purchase/.
Chicago Manual of Style (CMS):
Hire Purchase. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/hire-purchase/ (accessed: September 18, 2021).
American Psychological Association (APA):
Hire Purchase. PayrollHeaven.com. Retrieved September 18, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/hire-purchase/

Definition Sources

Definitions for Hire Purchase are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 15th February, 2020 | 7 Views.