Buying a Car on Hire purchase. The Do's & The Don'ts

 Buying A Vehicle on Hire Purchase vs Taking Car Insurance while paying on Hire Purchase 

In Mombasa - (Thread)


A hire purchase, is an arrangement whereby a customer agrees to a contract to acquire an asset by paying an initial installment and repaying the balance of the price of the asset plus interest over a period of time.


In Mombasa , across most showrooms  the repayment period is usually 12 to 15 months for units sold on Hire purchase.


HOW TO GO ABOUT HIREPURCHASE

* Negotiate the cash price first then settle for hire purchase. An Interest amount of Kshs 100,000 is added on top of the cash price if repayment period is 12 months & Kshs 150,000 if repayment period is 18 months.

Total price to be paid equals the cash price plus the interest.

A 1st deposit at point of  purchase usually 50% to 70% of the total Hirepurchase price should be made. Most showrooms will try to recover the Cost & Freight of the vehicle if they are selling on Hire purchase leaving the buyer to pay the VAT plus other charges for the agreed period of time.This is safe as they can readily order similar units from overseas to sell.


EXTRA COSTS ON HIREPURCHASE


* On top of paying the initial deposit you will be required to pay kshs. 15,000 to 20,000 for a tracking device . This is done in Secret by the Showroom & is meant to track the vehicle and aid in its recovery should you default or if it is stolen. 


* You will also pay for Comprehensive insurance of the vehicle. Its important to take excess protector extension on own damage just incase the vehicle gets involved in an accident & you're required to pay excess. This will protect you from paying excess. i.e the first part of a claim borne by the insured. Excess for accident damage on motor private policies is 2.5% of the insured value subject to a minimum of 15,000.


DO I GET THE LOGBOOK IN MY NAME ?


No you don't. The logbook remains in the name of the showroom until you finish paying instalments for the car. During this period you can not use the vehicle to secure a loan as the showroom has a financial interest in the vehicle. Their name appears on the logbook & also in joint name in the insurance policy. Its important to notify the insurance company of such an arrangement at the point of filling the proposal form so that the  financial interest of the showroom is captured in the policy. If you fail to do so & an accident happens , some insurance companies may fail to pay as your name will be the only one captured in the policy . Insurable interest plays a huge role here.


Do you have any Questions relating to our topic today ?


Call us on : +254705030596

Mombasa - Kenya


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