Summary
The hire purchase system originated in 1846 in the UK and later introduced in India, involves a higher taking possession of an asset with the intention to purchase it in the future. Key concepts include the higher purchase price, installment payments, and advantages like acquiring expensive items without heavy upfront investment. Contrasts between ownership in lease and hire purchase systems are discussed, highlighting that in hire purchase, the buyer takes ownership after the final installment, among other differences like responsibility for maintenance and depreciation claims.
Historical Background of Higher Purchase System
The origin of the hire purchase system dates back to 1846 in the United Kingdom, followed by its introduction in India. The system involves the higher taking possession of an asset with the intention to purchase it in the future, with terms like higher, seller, or creditor being commonly used in higher purchase transactions.
Concepts in Higher Purchase System
Key concepts in the higher purchase system include the higher purchase price, installment payments, down payment, higher charges, termination of the agreement, and advantages of the system such as acquiring expensive items without heavy upfront investment and flexible terms and conditions.
Comparison with Lease Finance
Differences between the ownership of assets in lease and hire purchase systems are discussed, emphasizing that in a lease, ownership lies with the lessor, while in hire purchase, the buyer takes ownership after the final installment. Other comparisons include the duration of the agreement, tax implications, responsibility for repairs and maintenance, and depreciation claims.
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