Hire Purchase

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What is a 'Hire Purchase'

A hire purchase is a method of buying goods through making installment payments over time. The term hire purchase originated in the U.K., and is similar to what are called "rent-to-own" arrangements in the United States. Under a hire purchase contract, the buyer is leasing the goods and does not obtain ownership until the full amount of the contract is paid.

BREAKING DOWN 'Hire Purchase'

Leasing goods in this manner is a tactic commonly employed by businesses in order to enhance the appearance of earnings metrics. For instance, by leasing assets, it may be possible to keep the debt used to pay for the assets and the asset itself off the balance sheet, resulting in higher operational and return-on-asset figures. In the U.S., consumer rent-to-own arrangements are controversial because they can be used in a way which attempts to circumvent proper accounting standards.

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