HIRE PURCHASE REGULATIONS

Press, Volume XCIII, Issue 27993, 13 June 1956, Page 16

HIRE PURCHASE REGULATIONS

CAR SALES ANOMALY ALLEGED SHORT-TERM REPAYMENTS NOT PERMITTED Anomalies in last year’s hire-pur-,'chase and credit sales regulations needed to be rectified if the regulations were going to carry out the intention of the Government and curtail excessive credit. Mr J. K. Burtt, an accountant, told members of the Christchurch Accountant Students’ Society at a luncheon yesterday. Mr Burtt, who is secretary of a finance company with more than 2060 accounts, wa» discussing some aspects of ; the administration and function of, finance companies. ** If a man wished to buy a car costing £6OO he could not pay the required £3OO deposit and undertake to complete payment in a lump sum in four months’ time, but had to arrange to pay the balance in three instalments, one every six months, Mr Burtt said. “If the intention is to get "money in quickly as possible the regulations are not helping in that case.” he said. “We have many clients w’ho could pay in a short time, but they : are forced to accept a longer credit Than they require.” Finance Companies’ Role Mr Burtt said that a number of persons had a wrong impression , about finance companies. Some thought that they “had a - bit of glamour.” while others believed that they made a lot of money, were social parasites, or that only the persons controlling the companies made any money. “They have a real purpose in society, not by advancing money on chattels already owned, but by advancing money to enable a sale of a chattel to take place.” Quite a number of retailers, especially those who dealt with smaller commodities. raised their own finance, but bigger retailers preferred to make use of a finance company and be able to buy stock for resale without having to worry about hire-purchase financing. f inance companies were also more easily able to bring pressure to bear on buyers in keeping up repayments Retailers, on the other hand, realised it was not good for business to be too tough, as that might frighten customers away, but if a finance company became very tough customers would in any case avoid the retailer who dealt with that company. Formula for Interest Mr Burtt said there was an established formula for working out the rate of interest on instalment plans. The original rate was multiplied by , two. and the period of hire in months, land the product divided by the sum ;of the period of hire in months plus (one. For example, if the original rate was 8 per cent, and the period of hire 18 months, the rate of interest on instalment would be 15.16 per cent. Similarly, if the period of hire was for 12 months, the rate would be 14.7 per cent., and for 24 months, the maximum. the rate would be 15.36 per cent. “Those sound high, but in regard to risks run and the business of administration because of monthly or more frequent payments, the costs of collection are fairly high.” Mr Burtt said.

"The provision of hire-purchase credit is now a well-established service in all the more developed economies.” said Mr Burtt. ‘‘ln fact, modern industrial development and consequent higher living standards based to a vfry great extent on the production of cars and durable household goods, would have been greatly retarded but for the use of hire-pur-chase financing. Without the development of this form of credit sale it would probably have been impossible for consumers to absorb the goods produced by modern mass production methods/’