hire-purchase

Definition

Sales promotion device that creates customers' purchasing power in the form of a fixed cost, fixed period installment loan, secured by a lien on the purchased item as the collateral. In case of capital equipment, the customer repays the loan from the earnings generated by the purchased asset (which otherwise would have remained unsold due to the customers' lack of cash). During the repayment period the buyer has the possession and use but not the ownership (title) to the item. Only upon the full payment of the loan, the title passes to the buyer. Also called installment buying, it is a social innovation that expands the economy with additional income. Cyrus McCormack (1809-84, one of the inventors of the harvesting machine) pioneered it in the early 19th century US, and Issac Singer (1811-75, one of the inventors of the sewing machine) made it a common practice.