What is the difference between hire purchase and leasing for a car loan?
Hire purchase finances the purchase of vehicles and plant and equipment. The asset under finance is purchased by the finance house and hired to the customer. Its ownership is passed on to the customer (the hirer) when the last instalment is paid. Leasing is another finance arrangement similar to hire purchase. With a lower interest rate, leasing requires customers to pay advance rentals (usually equal to loan tenure + 1, ie customers of a 4-year loan should pay 4+1=5 monthly instalments in advance). Leasing is more attractive to customers who have excess liquidity and would like to pay advance rentals in exchange for a lower interest rate.
