State five effects of hire purchase on each of the following (a) buyer; (b) seller

(a) Five effects of hire purchase on the buyer

1. The buyer takes possession of and uses the goods immediately while paying by instalments.
2. The buyer pays more than the cash price because of the interest added, so the goods cost more in the end.
3. The buyer becomes the legal owner only after paying the last instalment.
4. The buyer may lose the goods and the instalments already paid if he defaults before completing payment.
5. Hire purchase enables the buyer to acquire expensive assets that he could not pay for at once, but it may tempt him to overspend and fall into debt.

(b) Five effects of hire purchase on the seller

1. The seller enjoys higher total returns because interest is charged on the instalments.
2. The seller increases sales volume by attracting buyers who cannot pay cash.
3. The seller remains the legal owner of the goods until the final instalment is paid, giving him security.
4. The seller can repossess the goods if the buyer defaults on payment.
5. The seller has his capital tied up over the payment period and bears the risk of bad debts and the cost of collecting instalments.