Hire Purchase and Rent to Buy
What is hire purchase (HP) and rent-to-buy?
Hire-purchase is generally a very expensive way to purchase an
item. So always exercise caution before going down this route.
Generally the cheapest way to make purchases is to save up and buy
the item outright from a high-street or internet retailer. Whilst
this requires a bit of patience it does save money and therefore
allows you to buy more in the long run.
A hire purchase or rent-to-buy agreement is a form of secured
loan. Simply, the lender can take back the goods (repossess) in
certain situations until the agreement has finished.
Many people use HP to buy large items such as cars, household
appliances and furniture. One of the biggest high-street names in
this area is Bright House.
With an HP agreement the goods are hired to you for the time of
the agreement, in which you will have to make weekly or monthly
payments. The total amount you have to pay is the cash price of the
goods plus interest over the period of the agreement and any
charges they put on top.
The goods remain the property of the company until the HP
agreement has finished. You do not own it until the end of the
agreement. Therefore
- You cannot sell the item to anyone else
- You have to abide by the terms outlined in the HP
agreement
- Goods can be removed from you if you don’t stick to the terms
of the agreement
When you have completed all the payments you can ask to have the
ownership of the item transferred over to you. This needs to be
within 30 days & in writing. If you don’t want to own the item,
you can return it and you may get a discount on a new HP
agreement.
Optional Service Cover
Companies often describe optional service cover as - “a
convenient means of getting goods, which customers use on a regular
basis, repaired quickly and to a reliable standard”.
But the problem is that ‘optional service cover’ often isn’t
really optional nor is it service cover. Sometimes it’s a thinly
disguised protection plan that massively increases the overall cost
of the product and it protects the interests of the shop and not
you. To put it another way – you are renting the goods, so they
belong to the HP firm. And you are paying them to repair their
stuff! Worse than that – you are paying them to repair their stuff
whether it goes wrong or not. Good idea?
Damage Liability Cover
A sort of insurance policy, often underwritten by the same
company that is selling you the goods, arranging finance and
charging you ‘optional’ service cover. It might be automatically
loaded onto the agreement. It isn’t as good as proper home
contents insurance, doesn’t insure your contents and costs a
lot more. You could possibly insure your whole house contents for
less with a proper policy. OSC & DLC are really one huge
inflated payment protection scheme split into two.
To get more in-depth information on your rights visit:
www.creditaction.org.uk/ .
www.consumerdirect.gov.uk/
You can download a fact sheet on how to deal with Hire Purchase
Debt at insolvencyhelpline.co.uk/debt_factsheets/index.php