Interest & hire purchase

Hire purchase A deposit is paid up front. The financed balance is the cash price less that deposit. The total hire-purchase cost is the deposit plus all instalments. If the instalments are supplied, use their stated amounts. If the question charges simple interest on the financed balance, calculate interest on that balance. Add it to the balance and divide by the number of payments. Example For a cash price of $1200, a 25% deposit is $300, leaving $900 financed. At 5% simple interest per year for one year, interest is $45. Twelve monthly payments share $945, giving $78.75 each. The total cost is $300+$945=$1245. Check the interest base and time units. Here the excess over the cash price is $45, exactly the interest.

A deposit is paid up front. The financed balance is the cash price less that deposit. The total hire-purchase cost is the deposit plus all instalments.

If the instalments are supplied, use their stated amounts. If the question charges simple interest on the financed balance, calculate interest on that balance. Add it to the balance and divide by the number of payments.

For a cash price of $\$1200$, a 25% deposit is $\$300$, leaving $\$900$ financed. At 5% simple interest per year for one year, interest is $\$45$. Twelve monthly payments share $\$945$, giving $\$78.75$ each. The total cost is $\$300+\$945=\$1245$.

Check the interest base and time units. Here the excess over the cash price is $\$45$, exactly the interest.