Hire-Purchase Agreements Define

Like leasing, lease purchase agreements allow companies with inefficient working capital to use assets. It can also be more tax efficient than the standard credit, as payments are accounted for as expenses – although any savings are offset by tax benefits resulting from depreciation. Leases can be concluded with banks, mortgage companies, financial companies and certain retail businesses, for example garages. The store or garage doesn`t really provide the credit. He acts as an agent for a financial company and earns commissions from the finance company for the intermediation of the loan. Rent to Own agreements are also excluded from the Leases Act in the Lending Act, as they are considered leases and not a credit extension. If an amount equal to the original total price, plus interest, has been paid at the same rate, the buyer may exercise an option to purchase the goods at a predefined price (usually a nominal amount) or to return the goods to the owner. Companies that need expensive machinery — like construction, manufacturing, facility rental, printing, road freight, transportation, and engineering — can use leases, as well as startups that have few collateral to set up lines of credit. . . .

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