Hire purchase is a common way of paying for major items such as cars, furniture and computers. This is popular in Nigeria, primarily because the larger section of the population belongs to the low income and middle income groups.
Hire purchase (HP), as the business is often called, gives these two categories of earners an opportunity to own properties without paying for them at once. HP financing is one of the most common ways for people to buy cars and motorbikes for either private or commercial use. The hirer is expected to pay back in installment to the financier based on an agreed duration, while he or she is given the possession of the car or motorbike. When the property is fully paid for, its ownership is then transferred to the hirer.
But like any credit deal, you need to think carefully before committing yourself, consumerpurchase.com warns. Here is a testimony from an administrator, Mr. Adebambo Ogunleye, says hire purchase business can be taken as a full time or a part time business. According to him, you can have your full time job and still engage in the hire purchase business. He says, ”I‘m a senior civil servant and I take hire purchase as a part time job. I have been doing hire purchase business for over 10 years now. It‘s not a business that is tasking. All you need to do is to know your clients very well and don‘t have more than two to three clients at a time. ”I make sure that I don‘t have more than three people that I‘m dealing with at a time. When a client completes his payment, I start with another person. Mostly, I work with people that are into car hire services.”
On the modalities for the business, Ogunleye says, ”Mostly, I deal with associations and they come with guarantors. They provide one third of the cost of the car and I provide the remaining money. The car is mine until they finish paying, although the car will be in their care.” He adds, ”The payment is done by installment within two years, with additional 60 per cent of the cost of the car, which is the cost of borrowing (hire purchase). Ogunleye stresses that the car must have a comprehensive insurance. He says,”The car must be completely insured so that if there is any case of accident or robbery, the insurance company will bear the liability.”
Hire purchase differs from a mortgage and other forms of credit. The buyer, who has the use of the goods, is not the legal owner during the term of the hire-purchase contract. If the buyer defaults in paying the complete money, the owner may repossess the property.
Mr. Solomon Ogwuchi also runs a hire purchase business. He deals with motorbikes, popularly called okada in Nigeria. Ogwuchi, says he pays all his bills from this business.He buys a motorbike and gives it to someone who will drive it for a period of six months, during which the hirer will pay for the cost of the bike and the owner‘s profit. He says,”What I do is that I buy a brand new bike for about N98, 000. I get the registration number and other necessary things. I give it out to someone I know very well. At the end of six months, I get a total of N150, 000. On why you have to give it to the person you know, Ogwuchi says, ”It is very important that you give it to someone you know. A lot of people have lost their bikes in this business because they were given out to people they did not have a good relationship with. Some will run to another state with your bike because they know you don‘t know their family members. ”In addition to knowing their family members, they must bring a guarantor each that will be held liable in case of default.” Ogwuchi adds that HP business is like any other form of investment where your money works for you, although it has a bit of risk too, like any investment.
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