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Insuranceeeeee

Instalment trading allows customers to purchase items by making a small down payment and paying the balance in fixed instalments over time, targeting middle and lower-income individuals. It includes hire purchase and deferred payment types, with advantages such as immediate possession of goods and affordability, but also disadvantages like impulse buying and potential repossession. Interest is typically added to the sales price, and customers must have a stable income to qualify.

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guptapearl2012
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27 views11 pages

Insuranceeeeee

Instalment trading allows customers to purchase items by making a small down payment and paying the balance in fixed instalments over time, targeting middle and lower-income individuals. It includes hire purchase and deferred payment types, with advantages such as immediate possession of goods and affordability, but also disadvantages like impulse buying and potential repossession. Interest is typically added to the sales price, and customers must have a stable income to qualify.

Uploaded by

guptapearl2012
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as KEY, PDF, TXT or read online on Scribd

INSTALMEN

T TRADING
UNIT 2
What is instalment trading?
Transaction that Pay a Take item home
allows a customer deposit/down immediately
to purchase an payment
item by:

Ownership of Pay the balance


the item only later
after completing
all the
instalments
Why instalment
trading?
Target middle and lower income customers who are not
able to pay a large sum of money immediately
A small down payment indicates customer’s commitment
to the purchase
Helps trader (seller) to increase sales
Usually in fixed instalments over a period of
time

Short period – higher instalment amount

Instalment Long period – lower instalment amount

payments
Instalment payments are deducted through a
bank account

Usually interest is added to the sales price


Types of instalment trading

Hire Deferred
purchase payment
0% interest instalment scheme
HIRE PURCHASE
Parties involved: Trader/seller, buyer/hirer
Contract agreement signed between parties
Trader will work out a fixed instalment amount to be paid by buyer on a
weekly or monthly basis over a period of time
The longer the period of time, more interest is added to the sale price
Buyer is really hiring the use of the goods, no legal ownership
If buyer is unable to pay instalment, Trader can repossess the good +
demand compensation for balance payment
Examples of hire
purchase goods
More expensive goods
Typically electronic goods eg Television, air-conditioners,
household items like refrigerator, washing machin,
vacuum cleaners
Also cars, commercial vehicles
Advantages of hire purchase

1) Customers/buyers just 2) Payment is spread over a


pay deposit and get the long period, each instalment
good immediately is more affordable

3) Some hire purchase 4) Benefit traders as it


requires customer’s proof of encourages customers to
annual salary to ensure their buy on the spot.
ability to pay the instalments
1) Customer may buy on impulse though
they may not need the item.

2) Available only to customers with an


income.
Disadvantag
es of Hire
3) Problems if customers default on payment
Purchase and item will be repossessed.

4) High hidden interest in the sales price.


Customers can be misled by advertisement
gimmicks of 0% interest.

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