The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, MAY 10, 1927. CREDIT SYSTEM OF HIRE PURCHASE.

Hokitika Guardian, 30 May 1927, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, MAY 10, 192 7 . CREDIT SYSTEM OF HIRE PURCHASE.

During the last five or six years the purchase of goods by instalments or. as it is known, the hire purchase system, has assumed large proportions, especially in England and America. In the United States where this form of merchandising has been particular]v encouraged, it is estimated that last year over £1.200.000.000 of purchases were made hv means of partial payments, but in countries other than England and America instalment selling has not yet become so widespread as to have a really marked influence on business and industry. French law recognizes a form of conditional sale in which the title passes to the buyer on payment of tlie last instalment, and in which motor-cars, house furnishings, musical instruments, typewriters, sewing machines and real estate are among the goods sold. In Germany sales on the instalment plan under which title to the property remain vested with the vendor are customary, and are becoming increasingly popular. The growth of the instalment purchase system in the United States has led to similar systems being developed in Brazil, Chile and Peru, among

articles sold being motor-ears, machinery. agricultural implements and musical instruments. According to the American Exporter. New York, the American Academy of Political and Social Science has recently completed a Manual study of the economic and social consequences of instalment buying, and points out in its report that the granting-of instalment credit for production purposes meets with little or no criticism, and declares iTuit “the instalment system performs a useful function in our economic structure, and is here to stay." The question of the soundness of the instalment system seems to ho one of degree, as it. is in other tyncs of credit. Capacity to nay should he c.refully examined, for instalment credit cannot peii manently increase consumption beyond the limit of income. The fundamen tals of sound instalment credit vnr\ with different classes of goods, hut. in the last analysis, they are simple. The article sold on the hire purchase system must he one which is not rapidly consumed in its use. The initial payment must, he large enough for the purchaser to have sufficient at stake so that his self-interest will prompt him to save. The term of payment should not extend beyond the life of the residual value of the article, and payments should not exceed the ability of the debtor to liquidate them. The moral character of the purchaser should also he carefully considered. Instalments are relatively short time credits, hut their liquidation, it is stated, is like that of a funded debt, in which the value of the security is at all times controlled by its physical usability, and not by fluctuating market conditions.