Theory question 102
Purchase and Sale of GoodsCommerce 2 (essay)
(a) Differentiate between Hire Purchase and Credit Sale
(b) Give four advantages of hire purchase to each of the following (i) a seller (ii) a buyer
Show the model answer
(a) Hire purchase: ownership passes to the buyer only after the last instalment; seller can repossess goods if buyer defaults; usually for durable goods; a deposit is paid. Credit sale: ownership passes at once (on the first payment/at the sale); seller cannot repossess, only sue for the debt; often cheaper goods.
(b)(i) Seller (any four): increased sales/turnover; sells expensive durable goods more easily; earns interest (higher price than cash price); can repossess goods if the buyer defaults; keeps ownership until fully paid; attracts more customers.
(ii) Buyer (any four): uses goods before paying fully; can acquire expensive goods without large cash; pays from income in small instalments; improves standard of living; can return goods before completing payment; obtains credit not available from banks.
The key difference in (a) is when ownership passes.