Hire Purchase

Hire Purchase is the process of buying goods(items) by paying for them in installments over a selected time period. At some point in time you would have heard the term hire purchase from a family member, friend or even a neighbor.

What happens is the customer may not be able to pay the cash price (cost price) of an item based on limited funds so the store would offer to let the customer pay for the item on hire purchase. 

Although this may appear to be good, note that anytime you buy an item on hire purchase, you end up paying back more money that the cash price of the item.

This is the generic formula used to buy an item on hire purchase

Hire Purchase = Deposit + Total Monthly Installments


Using this knowledge, attempt the following question.

Question

A man buys a stove hire purchase by paying a deposit of $400 and 12 monthly installments of $300 each. Determine the total Hire Purchase Price

Comment with your Solutions or Queries




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