Guide to starting a hire purchase business in Nigeria

So many people have become rich running the hire purchase business in Nigeria. A hire purchase business is typically a kind of loan business used to purchase an expensive auto-mobile usually a car or motorcycle. This kind of business is very popular in Nigeria.

With hire purchase, the company or entrepreneur does not need to do any physical labor to generate money from the asset. The entrepreneur just need to sign an agreement with a buyer which is usually the driver on an agreed installment payment plan towards the purchase price of the item plus an agreed upon interest rate.

Running a hire purchase business in Nigeria, the property is not owned by the buyer until the entire sum of the money on the property is fully paid to the lender.

With this kind of business, you can make up to 200% return on investment from just a single property. Usually, a driver will use it for commercial purposes in a bid to pay for the total cost of the vehicle (with interest) in installments.

The best part of this business is that you can still have your full-time job while running a hire purchase business.

In hire purchase, the driver uses the vehicle for passenger, goods or oil haulage and pays an agreed amount daily, weekly, biweekly or monthly until he covers the cost stipulated by the agreement between him and the investor.

The time frame varies from the kind of vehicle it is either a car, bus, keke napep or even motorcycle and the kind of hire purchase agreement but is usually between the range of six months to one year.

Investors in truck, car, cargo bus and motorcycle hire purchase business can make between 150% – 200% return on their investment in a single deal.

This comes from the interest that the driver pays on the vehicle when paying back for the vehicle he uses. For instance, an Okada goes for around 120,000 naira but most investor give it out on hire purchase between
#180,000 – #200,000.

The first step you need to take when starting a hire purchase business is to first insure your property. This is very important in case of accident or robbery attack.

If an accident or robbery attack occurs during the process of using the property for commercial purpose, the insurance company bears the liability so you don’t have to worry yourself.

After you have known the total cost of your property, it is now time for you to draw out a suitable installment payment plan that can get you your money back and interest within a short period.

A better installment payment plan should not be more than one year. Within one year you must have gotten your return on investment then hand over the property to the buyer as the full owner of the property while you go and purchase another one and came choose to continue the process.

The buyer of your property will either make or break your hire purchase business if some factors are not taken into consideration before handling over your property.

What will happen if the buyer (driver) miss the agreed weekly or monthly payment? Do you have an alternative plan in mind on what to do about that? Is there any penalty on late payment? How will the property be managed by the buyer to ensure the property stay in good shape during the process of using it?

Will the maintenance be under your care or the buyer’s care?

These are questions you should answer before issuing out your property for hire purchase in Nigeria.

Because most times, buyers (mostly drivers) will come with lots of excuses about the property. Some will start telling you that the property always develops one faults or the other and they spend money fixing it every week so they can’t be able to meet up with the agreed payment plan.

To be successful in the hire purchase business in Nigeria, you need to hand over your property to a trusted and reliable person. Give your property to someone you know than someone you feel can pay back.

So many people have lost their property running this business because they gave their property to someone they don’t have good and enough information about.

Some buyers will just take your property and travel to another state because they know you don’t know any of their family members or their where about. Some will even use your property and fail to make payment when due giving lots of excuses.

Any buyers that will be interested in your property must bring at least two guarantors that can be held responsible in case of any lost. This way you are sure nothing funny will happen with your property.

A hire purchase business in Nigeria so far is one way to make money while you rest or sleep. In this form of investment, your money is working for you while you are thinking of other ways to make more money you are getting from your hire purchase business.

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