HR College of

commerce and economics

FYBBI
Semester I

Hire purchase &

Leasing

ACKNOWLEDGEMENT
We are students of class t.Y.B.B.I. belonging to group No.IV certify that
we have completed our project Hire purchase & Leasing on 03th August 2012
of the subject Financial Service Management under the guidance of Prof.
Prtricia pereira
First and foremost, we would like to thank to our Lecturer, for the
valuable guidance and advice. She inspired us greatly to work in this project. Her
willingness to motivate us contributed tremendously to our project. We also would
like to thank her for showing us some example that related to the topic of our
project.
And we also thank all the group members who have contributed in making
this project.
Thank you Maam
Finally, an honourable mention goes to our families and friends for their
understandings and supports on us in completing this project. Without helps of the
particular that mentioned above, we would face many difficulties while doing this
project.

TABLE OF CONTENTS
1

Introduction of Hire Purchase & Leasing

Type of Leasing

Features and Benefits of a Leasing

ADVANTAGES AND DISADVANTAGE OF LEASING

Features and Benefits of a Hire Purchase

ADVANTAGES AND DISADVANTAGE OF HIRE PURCHASE

DIFFENT METHOD OF HIRE PURCHASE

Standard Provisions Of Hire Purchase

DIFFERENCE BETWEEN HIRE PURCHASE AND LEASING

10

Case Study Leasing & Hire Purchase

11

Conclusion

12

Bibliography

INTRODUCTION TO LEASING

Leasing, as a financing concept, is an arrangement between two

parties, the leasing company or lessor and the user or lessee, whereby the former
arranges to buy capital equipment for the use of the latter for an agreed period of
time in return for the payment of rent. The rentals are pre-determined and payable
at fixed intervals of time, according to the mutual convenience of both the parties.
However, the lessor remains the owner of the equipment over the primary period.
By resorting to leasing, the lessee company is able to exploit the
economic value of equipment by using it as if he owned it without having to pay
for its capital cost. Lease rentals can be conveniently paid over the lease period out
of profits earned from the use of equipment and the rent is cent percent tax
deductible.
The fundamental characteristic of a lease is that ownership never
passes to the business customer.
Instead, the leasing company claims the capital allowances and passes some of
the benefit on to the business customer, by way of reduced rental charges.
The business customer can generally deduct the full cost of lease rentals from
taxable income, as a trading expense.
As with hire purchase, the business customer will normally be responsible
for maintenance of the equipment.

HISTORY OF LEASING

From the ancient Samarian city of Ur, archaeologists

found clay tablets, which documented farm equipment leases from the year 2010
BC. 50 years later, the king of Babylonia in his famous Code of Hammurabi
enacted the first leasing laws. The ancient civilizations of Egypt, Greece and Rome
engaged in leasing transactions of real and personal property, while the
Phoenicians actively promoted leasing by chartering ships to local merchants.
Leasing first appeared in the United States in the 1700s to
finance the use of horse-down wagons. By the mid-1800s, railroad tycoons,
involved third-party investors who would pool their funds, purchase railroad cars
from a manufacturer, then lease the cars to the railroad in the form of equipment
trust certificates. In the early 1900s, companies began to act as lessors for
equipment by leasing it out while maintaining title to it. Often, the lessees would
be shippers who wanted control over their shipments without ownership. This
method introduced the operating or true lease concept. Meanwhile, other
manufacturers were looking for additional ways to sell their merchandise. They
thought of installment sale, which allowed consumers and commercial markets to
augment their purchasing power by paying for equipment over time.

TYPE OF LEASING

Finance Leasing
The finance lease or 'full payout lease' is closest to the hire purchase alternative.
The leasing company recovers the full cost of the equipment, plus charges, over the
period of the lease.
Although the business customer does not own the equipment, they have most of
the 'risks and rewards' associated with ownership. They are responsible for
maintaining and insuring the asset and must show the leased asset on their balance
sheet as a capital item.
When the lease period ends, the leasing company will usually agree to a secondary
lease period at significantly reduced payments. Alternatively, if the business wishes
to stop using the equipment, it may be sold second-hand to an unrelated third party.
The business arranges the sale on behalf of the leasing company and obtains the
bulk of the sale proceeds.

Operating Leasing
If a business needs a piece of equipment for a shorter time, then operating leasing
may be the answer. The leasing company will lease the equipment, expecting to
sell it secondhand at the end of the lease, or to lease it again to someone else. It
will, therefore, not need to recover the full cost of the equipment through the lease
rentals.
This type of leasing is common for equipment where there is a well-established
secondhand market (e.g. cars and construction equipment). The lease period will
usually be for two to three years, although it may be much longer, but is always
less than the working life of the machine
Assets financed under operating leases are not shown as assets on the balance
sheet. Instead, the entire operating lease cost is treated as a cost in the profit and
loss account.

Contract Hire:
Contract hire is a form of operating lease and it is often used for vehicles.
The leasing company undertakes some responsibility for the management and
maintenance of the vehicles. Services can include regular maintenance and repair
costs, replacement of tyres and batteries, providing replacement vehicles, roadside
assistance and recovery services and payment of the vehicle licenses

Sale and Lease Back and Direct Lease:

In the arrangement of sale and lease back, the lessee sells his asset or equipment to
the lessor (financier) with an advanced agreement of leasing back to the lessee for
a fixed lease rental per period. It is exercised by the entrepreneur when he wants to
free his money, invested in the equipment or asset, to utilize it at whatsoever place
for any reason.
On the other hand, direct lease is a simple lease where the asset is either owned by
the lessor or he acquires it. In the former case, the lessor and equipment supplier
are one and the same person and this case is called bipartite lease. In bipartite
lease, there are two parties. Whereas, in the latter case, there are three different
parties viz. equipment supplier, lessor, and lessee and it is called tripartite lease.
Here, equipment supplier and lessor are two different parties.

Single Investor Lease and Leveraged Lease:

In single investor lease, there are two parties - lessor and lessee. The lessor
arranges the money to finance the asset or equipment by way of equity or debt. The
lender is entitled to recover money from the lessor only and not from the lessee in
case of default by lessor. Lessee is entitled to pay the lease rentals only to the
lessor.

Leveraged lease, on the other hand, has three parties lessor, lessee and the
financier or lender. Equity is arranged by the lessor and debt is financed by the
lender or financier. Here, there is a direct connection of the lender with the lessee
and in case of default by the lessor; the lender is also entitled to receive money
from lessee. Such transactions are generally routed through a trustee.

Domestic and International Lease (Cross Border lease):

When all the parties of the lease agreement reside in the same country, it is called
domestic lease.
International lease are of two types Import Lease and Cross Border Lease. When
lessor and lessee reside in same country and equipment supplier stays in different
country, the lease arrangement is called import lease. When the lessor and lessee
are residing in two different countries and no matter where the equipment supplier
stays, the lease is called cross border lease.

Capital lease:
It is a lease obligation that has to be capitalized on the balance sheet. It is
characterized by: it is non-cancellable; the life of lease is less than the life of the
asset being leased: and, the lessor does not pay for the upkeep, maintenance , or
servicing costs of the asset during the lease period.

Sub-lease:
A transaction in which leased properly is released by the original lessee to a third
party, and the lease agreement between the two original parties remains in effect.

Features and Benefits of a Leasing

Leasing allows you to drive a bigger, better, newer vehicle more often, with a
smaller financial commitment than a personal loan, because you are only paying
for the portion of the car you are using during the lease term. Typical features of a
car lease include.
Repaying only what you use. The monthly repayments of a lease are calculated
on the vehicles depreciation during the lease term.

Must have a balloon. The balloon payment reflects what your vehicle is
expected to be worth at the end of the loan term.

so the sale of the vehicle should pay out your balloon. With a lease you must
set a balloon amount, for example a 3 year lease may have a 45% residual
balloon, a four year lease could have a 35% residual and a 5 year lease may
only be able to have a 25% residual.
Higher insurance costs. The cost of insuring a leased vehicle as opposed to one
you own outright can be higher.
You can keep the vehicle. At the end of the lease term you are able to make an
offer on the vehicle to buy it, and this amount will need to come from your
pocket.
Vehicle value. You may also have to pay an amount out of your pocket if there
is a difference between the residual value and the market value of the vehicle at
the end of the lease term. This could be due to unexpected wear and tear on the
vehicle, or higher miles which diminish its value.

 Limited miles. A lease may impose a limit on the number of miles you can
travel during the lease term and the more miles you drive, the more expensive
your lease can be. In some cases there are additional charges payable at the end
of the lease if you go over the limited miles. At the same time, the more miles a
vehicle has done, the lower its resale is so even if your lease has unlimited
miles, keep your residual value in mind.

ADVANTAGES AND DISADVANTAGE OF LEASING.

Advantages of Leasing
1. No Large Outlay
The biggest advantage of leasing equipment is that the cost is spread over a
number of years; there is no need for you to pay the entire amount upfront. This
can significantly help maintain cash flow, which is critical to all businesses. Poor
cash flow is the main cause of small business failures, and leasing can help you to
keep it under better control.
Leasing can also allow you to use better equipment (e.g. A more efficient / faster /
more accurate product) that would be too expensive to buy outright.
2. Security
When you lease a product, it is still owned by the leasing company, meaning that
they have better security on your finance. This means you are unlikely to need any
further security to be able to start a leasing contract, and therefore you have a much
better chance of acceptance (passing the credit check) than with other forms of
finance.
3. Tax Advantages
Lease rentals are considered as an operating cost, which means that it is often
possible to deduct them from taxable profits (as a trading expense). However, you

should always check that the equipment you are buying is eligible before agreeing
to a contract.
If your business pays no or minimal taxes, then some leasing companies will claim
the capital allowance on your behalf, and lower the leasing costs accordingly.
4. Budgeting
As a lease agreement is almost always a fixed contract, it is relatively easy to
budget and forecast with. The amount can be worked into your businesses budget
much more easily than an irregularly occurring lump sum; allowing you to keep a
much better control over current and future cash flow. In the event that you need an
item replacing quickly, you can do so with a relatively minor monthly adjustment
to the budget, instead of a lump sum that could seriously damage cash flow.

Disadvantages of Leasing
1. No Ownership
The main disadvantage of leasing is that you never own the product. It remains the
property of the leasing company during and after the lease. The only exception
being if you arrange for it to be sold to another company or person, in which case
the leasing company would receive the money and a percentage would be passed
back to you (depending on the amount, product type, age, and which leasing
company you use).
As you do not own the product, you are unable to sell it in the event it is no longer
needed, and you cannot upgrade to a newer or better product without either paying
off the remaining contract, or paying a large fee to cancel the contract. You also
need to carry on paying a smaller lease cost, even after the cost of the equipment
has been fully covered.
Hire purchase will allow you to own the product at the end of the agreement, but
this is normally more difficult to arrange, and is often available only on highly
costly items.
2. Long Term Expense

Although leasing allows you to avoid paying a large lump sum, over a long period
of time it often works out considerably more expensive. Over the course of a
standard lease, you pay the cost of the equipment as well as the leasing companies
charges.
After the lease finishes you need to carry on paying rental to use the product
(although after the initial lease the cost of rental goes down significantly). This
means that over a number of years, you will pay considerably more than the actual
cost of the equipment without ever actually owning it.
3. Maintenance
Although you do not own the equipment that you lease, you are still responsible for
its maintenance and repair. Unless you have specifically trained employees to fix
the equipment, then this could prove very costly in the event of a serious fault.
Some leasing companies will allow you to cover the maintenance and repair costs
for an extra sum (which is added to the monthly leasing cost). This will increase
your monthly payments, but may save you money in the long run; particularly with
manual or highly technical products that may go wrong frequently, and may cause
severe disruption if out of action. Cover is normally through the leasing company
itself, or through a separate insurance policy.
Car leasing is slightly different, as many of these agreements include basic
maintenance. However, it is vitally important to check, as some will not include it
in the basic price, and the terms and conditions will vary with each leasing
company.
4. Lost tax benefits:
A potential disadvantage of leasing is losing the tax benefits of depreciation
deductions that come with ownership. This disadvantage may be insignificant,
however, if the lost benefits are offset by deduction of rental payments or if
revenue income is less or tax liability is less anyways because of other factors of
taxation.

INTRODUCTION TO HIRE PURCHASE

Hire purchase is a type of installment credit under which the hire
purchaser, called the hirer, agrees to take the goods on hire at a stated rental, which
is inclusive of the repayment of principal as well as interest, with an option to
purchase. Under this transaction, the hire purchaser acquires the property (goods)
immediately on signing the hire purchase agreement but the ownership or title of
the same is transferred only when the last installment is paid.
The hire Purchase Act, 1972 defines a hire purchase agreement as,
an agreement under which goods are let on hire and under which the hirer has an
option to purchase them in accordance with the terms of the agreement and
includes an agreement under which:a) Possession of goods is delivered by the owner thereof to a person on
condition that such person pays the agreed amount in periodical
installments, and
b) the property in the goods is to pass to such person on the payment of the last
of such installments, and
c) such person has a right to terminate the agreement at any time before the
property so passes.

HISTORY OF HIRE PURCHASE

Hire purchase has been there in India for more than 6 decades.
The first hire purchase company is believed to be Commercial Credit Corporation,
successor to Auto Supply Company. This company was based in Madras. In north
India, Motor and General Finance and Installment Supply Company was set up.
This was around 1925.
Consumer durables hire purchase was promoted by the dealers in
the equipment. Singer Sewing Machine or Murphy radio dealers would provide
installment facilities on hire purchase basis to the customers of their products. Hire
purchase of commercial vehicles also has flourished fast.

Features and Benefits of a Hire Purchase

When you enter into a hire purchase arrangement, your financier is agreeing
to purchase equipment or a vehicle on your behalf, and then hire it back to you
over a set term. This means you have the use of the vehicle during that term, but
dont own it. Other features of a hire purchase include:
A loan term of between three and five years. As part of the hire agreement you
can choose how long you want to hire your vehicle back for.
You own the vehicle at the end. At the end of a hire purchase agreement, once
you have made your final payment and any balloon payment you
implemented, the vehicle is automatically yours.
Upfront costs. When you first enter into a hire purchase you will need to make
an initial loan payment and pay a deposit, stamp duty and registration fees. In
some cases you can negotiate that some of these fees be added to the hire
amount.
Full monthly repayments. The monthly repayments due on your hire purchase
will be calculated on the total amount of the purchase price, plus interest
charges, duties and other loan fees.
Do you want a balloon? With a hire purchase you can choose whether or not
to have a balloon payment due at the end of the loan term. Having a balloon
payment will lower your monthly repayments, but this amount will be payable
at the end of the term, and you need it to correlate to the market value of the
vehicle at the time.
More expensive insurance. When you are hiring a vehicle rather than buying it
outright, your insurance company can often impose higher premiums.
Keep, sell or refinance your hire purchase. At the end of the hire purchase
term you can keep the car after you make your final payment and pay out any

balloon. You can also sell or trade in the vehicle, but the risk of dropping
value now become yours. Or you can refinance the balloon amount over a new
term if you want to keep the vehicle for a few more years.
Unlimited miles. There are no limits to the miles you can put on the clock
with a hired vehicle, but just keep in mind that the more miles the vehicle has,
the lower its value will be at the end of the hire term.
Tax benefits. With a hired vehicle you are able to claim depreciation of the
purchase price, plus the interest charges on your loan, and the ongoing
running costs of the vehicle, based on the percentage of business use.

ADVANTAGES AND DISADVANTAGE OF HIRE PURCHASE.

Advantages of Hire Purchase
Spread the cost of finance. Whilst choosing to pay in cash is preferable, this might
not be possible for consumer on a tight budget. A hire purchase agreement allows a
consumer to make monthly repayments over a pre-specified period of time.
1) Interest-free credit
Some merchants offer customers the opportunity to pay for goods and services on
interest free credit. This is particularly common when making a new car purchase
or on white goods during an economic downturn.
2) Higher acceptance rates
The rate of acceptance on hire purchase agreements is higher than other forms of
unsecured borrowing because the lenders have collateral;
3) Sales
A hire purchase agreement allows a consumer to purchase sale items when they
aren't in a position to pay in cash. The discounts secured will save many families
money;
4) Debt solutions
Consumers that buy on credit can pursue a debt solution, such as a debt
management plan, should they experience money problems further down the line.

Disadvantages of Hire Purchase

1) Personal debt
A hire purchase agreement is yet another form of personal debt it is monthly
repayment commitment that needs to be paid each month.
2) Final payment
A consumer doesn't have legitimate title to the goods until the final monthly
repayment has been made.
3) Bad credit.
All hire purchase agreements will involve a credit check. Consumers that have a
bad credit rating will either be turned down or will be asked to pay a high interest
rate;
4) Creditor harassment
Opting to buy on credit can create money problems should a family experience a
change of personal circumstances.
5) Repossession rights
A seller is entitled to 'snatch back' any goods when less than a third of the amount
has been paid back. Should more than a third of the amount have been paid back,
the seller will need a court order or for the buyer to return the item voluntarily.

Different Method of Hire purchase

Function
Hire purchases are used to acquire houses, automobiles, furniture, and other
large items that generally cannot be paid in a lump sum. Hire purchases function as
legal documents for which the lender can legally hold the title until the item is paid
in full.

Types
A hire purchase can be an installment or deferred payment plan. In the
former, a set monthly payment is paid on a certain day each month for a specified
length of time. After the last payment, the item becomes the purchaser's property.
In the latter, the property immediately belongs to the purchaser while payments are
regularly made.

Time Frame
A hire purchase can be for a few months up to many years. The interest rate
can vary from low to high, depending on the institution granting the agreement.
Usually, a more expensive item will be set up for 10, 15, or more years. Typically,
a mortgage covers a span of 30 years.

Facts
To be valid, a hire purchase must be signed by both parties. It should contain a
description of the item, the price paid, the deposit (if any), monthly amounts due,
statement of each party's rights, and requirements, if any, for early termination.

Benefits

Hire purchase allows a person to buy an item, such as a house, over a long
period of time. With such an agreement, the buyer can enjoy his property while
making payments. The buyer also has the right to sell the property and allow the
new purchaser possession of his house.

Warning
If the purchaser fails to make the installments in a timely manner, the lender
has the right to repossess the property or item. In severe cases, the purchaser may
file for foreclosure or bankruptcy, at which time the item's ownership will be
returned to the lender.

Considerations
Generally, a person must be at least 18 years of age to enter into a valid hire
purchase. There is no upper age limit to incurring such a purchase agreement.
Each person should carefully consider his financial position before incurring any
type of hire purchase.

Standard Provisions of Hire Purchase

To be valid, HP agreements must be in writing and signed by both [parties].They

must clearly lay out the following information in a print that all can read without
effort:
1. A clear description of the goods
2. The cash price for the goods
3. The HP price, i.e., the total sum that must be paid to hire and then purchase
the goods
4. The deposit
5. The monthly instalments (most states require that the applicable interest rate
is disclosed and regulate the rates and charges that can be applied in HP
transactions).
6. A reasonably comprehensive statement of the parties' rights (sometimes
including the right to cancel the agreement during a "cooling-off" period).
7. The right of the hire to terminate the contract when he feels like doing so
with a valid reason.
The seller and the owner
If the seller has the resources and the legal right to sell the goods on credit
(which usually depends on a licensing system in most countries), the seller and the
owner will be the same person. But most sellers prefer to receive a cash payment
immediately. To achieve this, the seller transfers ownership of the goods to a
Finance Company, usually at a discounted price, and it is this company that hires
and sells the goods to the buyer. This introduction of a third party complicates the
transaction. Suppose that the seller makes false claims as to the quality and
reliability of the goods that induce the buyer to "buy". In a conventional contract of
sale, the seller will be liable to the buyer if these representations prove false. But,
in this instance, the seller who makes the representation is not the owner who sells
the goods to the buyer only after all the instalments have been paid. To combat
this, some jurisdictions, including Ireland, make the seller and the finance house
jointly and severally liable to answer for breaches of the purchase contract

Implied warranties and conditions to protect the hirer

The extent to which buyers are protected varies from jurisdiction to jurisdiction,
but the following are usually present:
1. The hirer will be allowed to enjoy quiet possession of the goods, i.e. no-one
will interfere with the hirer's possession during the term of this contract
2. The owner will be able to pass title to, or ownership of, the goods when the
contract requires it
3. That the goods are of merchantable quality and fit for their purpose, save
that exclusion clauses may, to a greater or lesser extent, limit the Finance
Company's liability
Where the goods are let by reference to a description or to a sample, what is
actually supplied must correspond with the description and the sample.
The hirer's rights
The hirer usually has the following rights:
1. To buy the goods at any time by giving notice to the owner and paying the
balance of the HP price less a rebate (each jurisdiction has a different
formula for calculating the amount of this rebate)
2. To return the goods to the owner this is subject to the payment of a
penalty to reflect the owner's loss of profit but subject to a maximum
specified in each jurisdiction's law to strike a balance between the need for
the buyer to minimize liability and the fact that the owner now has
possession of an obsolescent asset of reduced value
3. With the consent of the owner, to assign both the benefit and the burden of
the contract to a third person. The owner cannot unreasonably refuse
consent where the nominated third party has good credit rating

4. Where the owner wrongfully repossesses the goods, either to recover the
goods plus damages for loss of quiet possession or to damages representing
the value of the goods lost.

The hirer's obligations

The hirer usually has the following obligations:
1. To pay the hire instalments
2. To take reasonable care of the goods (if the hirer damages the goods by
using them in a non-standard way, he or she must continue to pay the
instalments and, if appropriate, compensate the owner for any loss in asset
value)
3. To inform the owner where the goods will be kept.
4. A hirer can sell the products if, and only if, he has purchased the goods
finally or else not to any other third party.
It is pretty much similar to instalment but the main difference is of ownership.
The owner's rights
The owner usually has the right to terminate the agreement where the hirer defaults
in paying the instalments or breaches any of the other terms in the agreement. This
entitles the owner:
1. to forfeit the deposit
2. to retain the instalments already paid and recover the balance due
3. to repossess the goods (which may have to be by application to a Court
depending on the nature of the goods and the percentage of the total price
paid)

4. to claim damages for any loss suffered.

DIFFERENCE BETWEEN HIRE PURCHASE AND LEASING

Hire purchase is also different from leasing:
1) Ownership:
In a Contract of lease, the ownership rests with the lesser throughout and
the lease has no option purchase the goods.
2) Method of Financing:
Leasing is method of financing business assets whereas hire purchase is a
method of financing both business assets and consumer articles.
3) Depreciation:

In leasing, depreciation and investment allowance cannot be claimed by the

lessee, In hire purchase, depreciation and investment allowance can be claimed by
the hirer.
4) Tax Benefits:
The entire lease rental is tax deductible expense. Only the interest
component of the hire purchase instalment is tax deductible.
5) Slavage Value:

The lessee, not being the owner of the asset, does not enjoy the salvage
value of the asset. The hirer, in purchase, being the owner of the asset, enjoys
salvage value of the asset.
6) Deposit:
Lessee is enquired to make any deposit whereas 20% deposit us required in
hire purchase.
7) Rent-Purchase:
With lease, we rent and with hire purchase we buy the goods.
8) Extent of Finance:
Lease financing is invariably 100 percent financing, It requires no
immediate down payment or margin money by the lessee. In hire purchase a
margin equal to 20-25 percent of the cost of the asset is to be paid by the hirer.
9) MAINTENANCE:
The cost of maintenance of the hired asset is to be borne by the hirer
himself. In case of finance lease only, the maintenance of leased asset is the
responsibility of the lesse.

CASE STUDY LEASING

CSI Leasing Customer
Performs complex data analysis from oil and gas exploration findings
Headquartered in the southern U.S., with operating divisions on three
continents and five countries
Maintaining the most current technology systems critical to business model
The Problem
The primary reason this company leases technology is to stay current. A
cornerstone of their competitive advantage lies in the ability to quickly compute
complicated data and statistical analysis. Yet, with each global division choosing
technology lessors autonomously, the corporate headquarters was burdened with a
variety of problems. There was little consistency in lease terms and conditions, or
in the way leases were accounted for financially. Despite a corporate policy
mandating that all leases comply with U.S. FASB 13 treatment for operating
leases, the different international structures made it nearly impossible for the
corporate accounting group to validate compliance.
The Solution
Our customers goals for each international operating division were: pre-negotiated
terms, consistent lease rates worldwide and a refresh schedule determined by the

corporate office. Already enjoying a long-term relationship with CSI Leasing for
the U.S. operations, the CIO and CFO turned to CSI to examine a global
technology leasing solution. Their CSI account executive took on the role of global
account manager, and worked inside CSI to set up a consistent global program.
How We Did It
Because their U.S. account executive has direct access to our international
administration group, it was not difficult to make this happen. We established a
single worldwide program to meet each of our customers goals. By negotiating all
terms and lease rates globally, we were able to help our customer meet their FASB
13 requirements, while also allotting for differences in local tax laws.
Eliminating poor choices on a local level also helped our customer increase
operational efficiencies. With two dedicated CSI lease administrators worldwide
(one for all of North America and one for Europe), they now have a consistent and
personal support team for ordering and documentation procedures. Additionally,
the corporate technology group enjoys the ability to view global leased asset
details through My CSI in each location.
For this customer, the synergies from having a consistent theme worldwide show
from an accounting, operations and competitive standpoint.

Case Study Hire Purchase

This study attempts to analyze the quantitative as well as qualitative information to
identify and evaluate the performance and current state of affairs of finance
companies in the field of hire purchase financing in Pokhara. The study reveals that
the credit-deposit ratios are very satisfactory. The relationship between total
deposit collection and total loan to hire purchase loan is highly significant. The
businessperson and professional users are predominantly rushing in utilizing the
hire purchase financing due to the easy payment terms. The IRR on hire purchase
loan is normally higher than their explicit rate of interest and service charge.
Except in few cases, there are loan defaulters in all finance companies. In general,
the performance of finance companies in hire purchase financing is satisfactory.
The Commonest method OF selling property is the cash sale. The credit sale
system is an alternative method of cash sale. The third system of selling property is
the instalment system. In, installment system, property are delivered to the buyer
immediately but payments is made in periodic installments such as weekly or
monthly, quarterly or half-yearly or yearly so on. Hire purchase and installment
purchase systems are the major parts of installment system. However, hire
purchase installment system is the prime concern of this study.
With an increasing demand for better life, the consumption of property has been on
the uprising scale. This has not been backed up by adequate purchasing power,
transforming it into effectual demand (Mukharjee and Hanif 1998). This has
created the market for hire purchase system. When a person is unable to acquire an

asset against immediate cash payment, he may arrange with the vendor to stagger
the payment. Financial institution plays role of facilitators between buyer and
seller to enter into the hire purchase agreements.
Hirepurchase agreement makes it possible for businesspersons, professionals and
others to take advantage of assets all of which enable them to organize and operate
their activities effectively. After the liberalization policy introduced in 1990, the
financial sector especially the finance companies have contributed significantly to
increase the hire purchase business in Nepal. In this study, therefore, an attempt
has been made to analyze the current performance of finance companies in
Pokhara in the field of hire purchase financing.

Conclusion
Today asset based financing has formed an integral part of the Financing
scenario. This is because firms today cant afford to buy the equi pment s/
machi nes outri ght . Not al l fir ms today are that financially sound.
Today fir ms fi nd it extr emely di ffi cul t to obt ai n fi nanci al ai d fr om
t he nor mal sources. Firms that have the financial capacity prefer to hire/lease the
equipments it releases the financial burden as well as provides tax benefit of
depreciation. Especially Project financing has come of age as most of the banks
today are into project financing. Earlier it was chartered accountants who
indulged into project financing but now it is more of bank involvement. But
today the growth in Project F inance is l ow where as lease and hir e
purchase are on a upward tr end wi th more and more companies like
Bajaj, Hero Honda providing their products on hire. So i n the changi ng
econo mi c and financial environment of Indi a, asset based financing
has assumed an extremely important role.

Bibliography