A contract to take possession of goods on installment

Hire purchase is a form of contract in which the buyer takes possession of goods immediately and pays for them gradually through a series of installments, while ownership of the goods only passes to the buyer after the final installment has been paid. Until that last payment is made, the goods legally still belong to the seller, even though the buyer already has and uses them.

The other terms do not match this description. Trade-in-sale involves exchanging an old item as part payment towards a new one, not paying by installments. Conditional sale is similar to hire purchase in that ownership is delayed, but under a conditional sale, the buyer agrees from the outset to eventually buy the goods outright, whereas hire purchase technically gives the buyer an option, not an obligation, to buy at the end; hire purchase remains the standard, more commonly tested term for taking possession on installment terms. Credit sale, by contrast, transfers ownership to the buyer immediately at the time of sale, even though payment is still being completed in installments, which is the opposite of what is described here.

Examination reminder: the detail that decides between hire purchase and credit sale is when ownership transfers: at the end of installments (hire purchase) or immediately at the sale (credit sale).