What are the advantages of hire purchase


(i) To the Manufacturer-By increasing the sales of products it enables a more fully specialized system of production to be employed with a consequent reduction in unit costs.

(ii) To the retailer-It increase turnover and enhances the profitability of the enterprise. This is reflected in a general reduction in profit-margins in the competitive atmosphere of retail trade, so that the general public benefits by lower prices, whether or not they buy hire purchase.

(iii) To the consumer-It enables the consumer’s family to enjoy the possession of the goods before payment is required. By arranging repayments over a period of time the consumer budget for the purchase of expensive capital times out of weekly or monthly earnings. This may promote the family’s health.


It may provide entertainment and education It may save waste and promote economy. It may facilitate the mobility of labour.

(iv) To the general community-Modern consumer societies are based on the mass production of things most people want, and hire purchase keeps demand high and the general community prosperous. If the hire-purchase system did not exist, the general level of prosperity would fall and a decline in national income would follow form the inevitable decrease in specialization.

(v) To the financier –Hire purchase is a rewarding field of financial investment today, because, despite the chance of bad debts, the rewards earned are higher than the normal rates of interest. Although the Act of 1974 provides for the courts to step in and supervise, extortionate agreements’ this does not mean that the court will not allow a rate of interest which reflects the risks involved.

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