Hire vs cash purchase
Buying furniture or appliances at established stores could see you delving deep into your pocket if you are thinking of buying with cash. Coming up with all the money required to make cash purchases can be difficult for some; however, most established stores offer payment options for those who are unable to pay all the money up front.
One of the more established stores, Courts Jamaica Limited, provides the option for consumers to buy items on its hire-purchase payment plan. Trudy-Ann Givans, customer service representative at Courts, Cross Roads, stated: "Hire purchase is an arrangement that enables a person to take possession of an item while paying for it in instalments over an agreed period of time. At the end of the period, the person can take full and legal ownership of the item."
FACTS ON HIRE-PURCHASE AGREEMENTS
During the hire-purchase arrangement, you can choose the time period during which you will pay for the items. You can choose from three-, 10-, 12-, 18-, 24- or 36-month payment periods after you have paid the first instalment. There is also the payment plan of nothing down for 42 months, but this is only done during promotions.
Payments are made monthly on or before the date the customer received the goods. Customers usually receive their items after seven working days. Failure to do so will result in late payment charges. Should customers face financial difficulties during the hire-purchase agreement, it is advised that they contact the store and inform them of their situation. If this is not done, the company has the legal right to repossess the goods.
The hire purchase rate is set on the reducing balance method. However, interest is applied to items depending on the instalment period. The general interest rate is calculated at 2.24 per cent of the original price of the item. This rate may be lower, but it is dependent on the applicant's credit approval. This interest is paid at the end of the instalment period.
GENERAL RULES
Employed persons should take along the following items:
- Last two pay slips (or a job letter if they do not get pay slips).
- A valid identification.
- A recent utility bill (if the person rents a home, a rent receipt will suffice).
Self-employed persons should take the following items:
- Identification
- A recent utility bill
- A bank book
- Remittances (for example, a Western Union slip, to show proof of income).
Unemployed persons are not eligible for hire purchase.
Differences between hire and cash purchase
The following illustrates the difference between the cash purchase and hire purchase on a 21-inch television costing $18,000. The instalment period chosen for the television is three months.
Cash Purchase
- Go into store with cash, get discount and pay $16,000
- Leave store same day with new television.
Hire Purchase
- Go into store with down payment.
- Apply for hire purchase and pay first monthly instalment.
- Wait seven working days before getting product.
- Make second monthly payment
- Make third monthly payment
- At the end of instalment period, pay 2.24% of original price ($18,000).
- After completing all payment on television, you are now the full owner.