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Explain the term hire purchase - Leaving Cert Home Economics - Question 12 - 2009
Question 12
Explain the term hire purchase. This is a form of credit which is a combination of hiring and buying goods; the customer does not own the goods until the final paym... show full transcript
Worked Solution & Example Answer:Explain the term hire purchase - Leaving Cert Home Economics - Question 12 - 2009
Step 1
Explain the term hire purchase.
Answer
Hire purchase refers to a financial agreement that allows a consumer to obtain goods by making an initial down payment followed by a series of installment payments. During the hire purchase period, the consumer essentially rents the item until they complete the payment arrangement. Only after the final payment is made does the buyer gain ownership of the goods. This arrangement provides a way to spread the cost of expensive items without the need for immediate full payment.
Step 2
State one advantage of hire purchase for the consumer.
Answer
One significant advantage of hire purchase for the consumer is that it allows immediate access to goods without needing to pay the full price upfront. This enables consumers to acquire essential items during emergencies or unforeseen circumstances, making it easier to manage finances while enjoying the benefits of ownership as payments are systematically made.
Step 3
State one disadvantage of hire purchase for the consumer.
Answer
A disadvantage of hire purchase is that it often involves high-interest rates, which can lead to financial strain if the consumer is unable to keep up with payments. Additionally, if the consumer fails to meet repayment obligations, the hire purchase agreement can be terminated, and the goods can be repossessed, leaving the consumer without the item and still in debt.