Consumer / Non Consumer Hire Purchase Agreement

Just Mortgages Limited Ireland

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Hire purchase is an agreement whereby a person hires goods for a period of time by paying installments, and can own the goods at the end of the agreement if all installments are paid. Hire purchase agreements usually last between two and five years, the most common last three years. Under a hire purchase agreement, the consumer does not actually own the goods until the last installment is paid, although he or she has full use of the goods throughout the repayment period.

Hire purchase agreements can be held with banks, building societies, finance companies and certain retail stores, for example, garages. The store or garage is not actually providing the loan. It is acting as an agent for a finance company and earns commission from the finance company for arranging the loan. It is advisable to read a hire purchase contract very carefully before committing yourself to any agreement.

How does a hire purchase agreement work?

A hire purchase agreement is drawn up and signed by the hirer (the consumer) and on behalf of the owner (the lending institution). If there is a retailer involved, e.g., a garage, it also signs the agreement and supplies the goods in question.

Most of the car loans offered by garages are hire purchase loans. Consumers can also be offered hire purchase loans when buying furniture, computer equipment or electrical goods.

The hire purchase agreement states

  • The goods the agreement refers to, for example, a car or computer.
  • The cash price of the goods.
  • The hire purchase price, which is the total sum payable over the life of the loan in order to complete the purchase of the goods.

The hire purchase price is therefore the monthly payment or installment multiplied by the number of installments which have to be made. The amount of each installment by which the hire purchase price is to be paid. Sometimes the last installment required to end the agreement is much larger than all the others. This is called a "balloon" payment and will have to be paid to clear the loan and allow the consumer to become the owner.

A statement that the hirer has the right to withdraw from the agreement within 10 days of receiving a copy of the agreement. This is known as a 'cooling off' period. Often consumers are asked to give away this right by signing a waiver. You do not have to sign this waiver in order for your application to be processed. Consumers should try to take some time to read all the terms of the agreement and to ensure they understand these fully before signing this or any other part of the agreement.

A statement that the hirer (consumer) must inform the owner (finance house) as to the whereabouts of the goods to which the agreement relates.