Hire purchase and vehicle loans are two different types of financing options that can be used to help
individuals purchase a vehicle. While both options allow borrowers to finance the purchase of a
vehicle, they have some key differences that borrowers should be aware of.
Hire purchase is a type of financing option that allows borrowers to purchase a vehicle over time by
making regular payments to the lender. With a hire purchase agreement, the borrower pays an
initial down payment and then makes monthly instalments until the loan is fully paid off. Once the
loan is paid off, the borrower becomes the owner of the vehicle.
Vehicle loans, also known as auto loans, are a type of financing option that allows borrowers to
purchase a vehicle by borrowing money from a lender. Like a hire purchase agreement, a vehicle
loan requires the borrower to make regular payments to the lender until the loan is fully paid off.
However, unlike a hire purchase agreement, a vehicle loan does not transfer ownership of the
vehicle to the borrower until the loan is fully paid off. In some jurisdictions, the cost of depreciation
may be tax-deductible for businesses that use vehicles for business purposes, depending on the
ownership.
Note that some lenders may use them interchangeably or may even use the term leasing. Hire
purchase can also be done on industry and office equipment. Often purchaser may simply take the
instalment plan offered by the seller where they can actually hunt for their own loan, which could
be better, to make the purchase outright.