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Hire Purchase (Part 1)

The document provides information about hire purchase agreements, including: 1) Hire purchase allows customers to purchase goods without paying the full cash price upfront by making a down payment and paying the remaining balance plus interest over time in installments. 2) For the Kiara metal double bed priced at $1400 cash, the hire purchase price is $2880 paid over 24 months at $120 per month, resulting in interest of $1480 or 105% of the cash price. 3) For the Ruby 3-piece living room set priced at $3800 cash, with a $380 down payment and $237.50 monthly payments over 18 months, the total hire purchase price is $46

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77 views5 pages

Hire Purchase (Part 1)

The document provides information about hire purchase agreements, including: 1) Hire purchase allows customers to purchase goods without paying the full cash price upfront by making a down payment and paying the remaining balance plus interest over time in installments. 2) For the Kiara metal double bed priced at $1400 cash, the hire purchase price is $2880 paid over 24 months at $120 per month, resulting in interest of $1480 or 105% of the cash price. 3) For the Ruby 3-piece living room set priced at $3800 cash, with a $380 down payment and $237.50 monthly payments over 18 months, the total hire purchase price is $46

Uploaded by

Kelly Hibbert
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Consumer Arithmetic

HIRE PURCHASE
What is Hire Purchase?
Sometimes people need to buy things, although they may not have enough money to pay the full cash
or purchase price immediately.

Many businesses help people in this situation by offering a hire purchase agreement or an instalment
plan.

Traditional Hire purchase Plan

A down-payment or deposit, which is a percentage of the cash price is made at the time of purchase.

The balance, or outstanding balance, which is the different between the cash price and the down-
payment, is then treated as a loan and interest is payable on this amount.

The different between the hire-purchase price and the cash price is the service charge or carrying
charge. The amount represents the cost of the loan and is equivalent to the interest
For the Kiara metal double bed:
a. What is the hire-purchase price?
HP =Monthly instalment amount x number of instalments
$120 x 24
$2880 Kiara Metal
Double Bed
No down
b. Determine the difference between the hire-purchase price and cash price. payment
for 2
HP –CP $120 monthly
years
$2880 - $1400 Cash price: $
1400
$1480

c. Calculate the difference between the hire-purchase and the cash price as a percentage of the
cash price.

!"##$%$&'
Percentage = x 100%
()*+ ,%"($
$./01
Percentage = 2 100%
./11

Percentage = 105%
For the Ruby Three-piece living room set:
A. What is the total amount of the monthly payments?

Total amount of monthly payments = Monthly instalment amount x number of instalments


$237.50 x 18
$4275.00
Ruby 3 pc
B. Calculate the total amount paid for the set under the hire-purchase agreement Living Room
HP = down-payment + total amount of the instalments Set
$380 + $4275 Down-
380
$4655 payment: $
Monthly:
C. Determine the difference between the hire –purchase price and cash price. $237.50 for
Difference = HP – CP 18months
$4655 - $3800 Cash price:
$855 $3800

D. Calculate the difference between the hire-purchase price and the cash price as percentage of the cash price
!"##$%$&'
Percentage = x 100%
()*+ ,%"($
$.//
Percentage = 0.11 2 100%

Percentage = 22.5%
On your own (do in your notebook)

The cash price of a refrigerator is $5395.


If a customer chooses to do Hire-Purchase, he pays $539.50 as the
deposit (down-payment)and 12 monthly instalments of $550 each.
a. How much money does a customer pay in total as the monthly
payments?
b. What is the cost of the refrigerator on the Hire purchase agreement?
c. How much interest will the customer pay?
d. What is the interest as a percentage of the cash price?

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