What Is the Difference between Conditional Sale and Hire Purchase Agreement

As a professional, I have written an article on the difference between conditional sale and hire purchase agreements.

When it comes to purchasing goods or assets, there are several payment options available. Two common options are conditional sale and hire purchase agreements. While both options allow individuals to spread the cost of a purchase over time, there are significant differences between the two.

Conditional Sale Agreement

A conditional sale agreement is a contract between a buyer and a seller where the ownership of the goods or asset stays with the seller until the final payment is made. Under a conditional sale agreement, the buyer has the right to use the goods or asset but cannot sell or dispose of it. The buyer is only deemed the owner of the goods after the final payment is made and the seller transfers the ownership to the buyer.

In a conditional sale agreement, the buyer pays a deposit and then makes installment payments over an agreed period. The payments usually include interest, and the total amount paid is higher than the initial purchase price of the asset or goods.

Hire Purchase Agreement

A hire purchase agreement is also a contract between a buyer and a seller for the purchase of goods or assets. However, unlike a conditional sale agreement, the ownership of the goods or asset is transferred to the buyer immediately. The buyer has the right to use the goods or asset as long as they make the agreed payments.

Similarly, to a conditional sale agreement, a hire purchase agreement involves an initial deposit and installment payments over an agreed period. However, unlike a conditional sale agreement, the buyer can decide to sell or dispose of the goods or asset before the final payment is made. However, the buyer must settle the outstanding balance on the asset before transferring the ownership to a new owner.

Differences between Conditional Sale and Hire Purchase Agreements

The significant difference between a conditional sale agreement and a hire purchase agreement is the ownership of the goods or asset. Under the conditional sale agreement, the seller retains ownership until the final payment is made, while the buyer immediately takes ownership under a hire purchase agreement.

Another difference is that the buyer cannot sell or dispose of the goods or asset under a conditional sale agreement until the final payment has been made. In contrast, the buyer can dispose of the asset under a hire purchase agreement before making the final payment, provided they settle the outstanding balance.

Final Thoughts

Both conditional sale and hire purchase agreements are options for individuals seeking to purchase goods or assets and spread the cost over time. It`s essential to understand the difference between the two before settling for one. While both options have their advantages and disadvantages, it ultimately depends on the buyer`s preference and financial ability.