The Compendium

Hire Purchase Agreement

A hire purchase (HP) agreement is a credit agreement. A person or company hires an item (for example, a car, laptop or security system) and pays an agreed amount in monthly payments.

This person/company does not own the item until they have made the final payment. Personal Contract Plans (PCPs) are a type of hire purchase agreement.

Feature of hire purchase agreements are as follows:

• Some HP agreements have a ‘balloon payment’ as the final payment, which is normally higher than the usual monthly payments.
• The recipient of the goods under the agreement does not legally own the item until after the final payment is made, but they do have full use of the item throughout the payment period.
• The recipient of the goods under the agreement cannot legally sell the item until the agreement has been paid off.
• If the recipient of the goods under the agreement does not keep up the repayments, the item can be seized.
• The recipient of the goods under the agreement has the right to end the agreement at any time.

HP agreements are very similar to Personal Contract Plans for the purchase of vehicles.

[See ‘Personal Contract Plans’ and ‘PCPs’.]

Hive down is a form of reorganisation of a company whereby a business or businesses are transferred to a (usually new) subsidiary.

The reasons for hive down are usually:

• Part of a re-organisation required pre-investment, or pre-sale. For example, a potential purchaser may want to buy one business stream but not the other parts of the business.
• Different assets may be needed in different parts of the group.
• Ring-fencing assets from risk in the event of insolvency.