Legal Definitions - hire-purchase agreement

A hire-purchase agreement, also known as a lease-purchase agreement, is a type of rent-to-own purchase plan. It allows the buyer to take possession of the goods with the first payment and take ownership with the final payment. This type of agreement is commonly used for equipment or property leases.

For example, a small business may enter into a hire-purchase agreement for a new piece of machinery. The business would make regular payments to the leasing company, and once the final payment is made, ownership of the machinery would transfer to the business.

It's important to note that under a capital lease, the lessee is responsible for paying taxes and other expenses on the property. This type of lease is usually treated as an installment sale.