hire-purchase

This is the term for the method of buying things by paying small amounts of money regularly, as well as interest, over a period of time after receiving the goods.

The buyer doesn’t own the goods until the final sum has been paid. More money is usually paid for goods using this method.

For example, a second-hand car dealer is selling a car for £5400. Ben wants to buy the car using the hire-purchase method. The car dealer asks for a deposit of 30% and 24 monthly payments of £195.

Therefore, to calculate the deposit:

30% of £5400 = 0.3 × £5400 = £1620

Total monthly payments is 24 × £195 = £4680.

Hire-purchase price is £1620 + £4680 = £6300.

This means that Ben pays £900 more for the car using the hire-purchase method:

£6300 – £5400 = £900