When it comes to acquiring assets for your business, the two most common options are hire purchase and lease agreements. While both offer their own set of advantages and disadvantages, it`s important to understand the interest of other parties involved in these agreements.
Let`s take a look at the basics of hire purchase and lease agreements and the parties involved:
Hire Purchase Agreement:
A hire purchase agreement is a type of installment plan where the business owner pays for an asset in installments, with an option to purchase the asset at the end of the term. The asset is owned by the finance company until the final payment is made. The parties involved in a hire purchase agreement are:
1. The business owner: The individual or company that intends to purchase the asset.
2. The finance company: The lender that provides the funds to purchase the asset.
3. The supplier: The company that supplies the asset to the business owner.
Interest of other parties:
The finance company has a significant interest in the hire purchase agreement as they own the asset until the final payment is made. They have the right to repossess the asset if the business owner fails to make the payments. The supplier has a limited interest in the agreement as they receive payment for the asset from the finance company.
Lease Agreement:
A lease agreement is a contract where the business owner rents an asset for a specified period in exchange for regular payments. The asset is owned by the leasing company. At the end of the lease term, the business owner can choose to return the asset or purchase it at a pre-agreed price. The parties involved in a lease agreement are:
1. The business owner: The individual or company that intends to use the asset.
2. The leasing company: The owner of the asset who rents it to the business owner.
Interest of other parties:
The leasing company has a significant interest in the lease agreement as they own the asset and are responsible for its maintenance and upkeep during the lease term. They have the right to repossess the asset if the business owner fails to make the payments. The business owner has a limited interest in the agreement as they are only renting the asset and do not own it.
In conclusion, it`s important to understand the interest of other parties involved in hire purchase and lease agreements before entering into a contract. By doing so, you can make an informed decision that best suits your business needs.