Under the installment purchase system, there is an outright sale of goods with the buyer having the facility to pay the purchase price in a certain number of agreed installments. In this system, a certain amount is paid as a down payment amount at the time of signing the agreement. The buyer makes certain down payment at the time of signing an agreement and the balance is paying in installment over a period of time.
Features of the Installment Purchase System
The following are the features of an installment purchase system:
(1) The installment purchase system is just like an outright credit sale of goods. Under this system of purchase, the buyer acquires possessions of the goods immediately at the time of agreement and not after paying the last installment which is the case with hire purchase system.
(2) The buyer makes the payment in different installments over a period of time as agrees upon in the agreement. The Buyer is required to make payment in installment over a period of time which ranges from 1 year for products like television or air conditioners to 20 years in case of purchase of apartments.
(3) Under the installment purchase system, the buyer gets the immediate possession as well as the ownership of goods. Since ownership has passed the buyer cannot return the goods to the seller if he or she does not like the product.
(4) The seller can not responses the good if the buyer made default in the payment of installment but he/she can sue against the buyer for the recovery of the amount due.
(5) In case of default in the payment of installment, the total amount of installments already paid by the buyer can not be forfeited. In case of default in respect of the last Installment, the seller has no right to take back the goods. The seller can only sue the buyer for the unpaid balance.
(6) Under the installment system, the buyer can sell or mortgage the goods even before clearing all the installments. The buyer can also transfer the goods even if he or she has not paid the last installment because the owner has already passed at the time of the agreement.
(7) The risk of goods/assets are to be borne by the buyer just after signing the agreement. If the buyer fails to make the future payment, the seller cannot repossess the goods but he can sue against the buyer for the amount receivable.
(8) The buyer of the goods under an installment purchase system has no right to return the goods to the seller. In this system, the installment price includes both the cash price and the amount of interest for delayed payment.