Instalment payments and a final balloon payment.

Lease Purchase is a financial arrangement that allows an individual or a business to acquire an asset, such as a car or equipment, through a combination of instalment payments and a large final payment, known as a balloon payment.

Here's a breakdown of the key components of a hire purchase agreement with a balloon payment:

1. *Initial Deposit:* The buyer typically pays an initial deposit or down payment at the beginning of the agreement. This amount is usually a percentage of the total cost of the asset.

2. *Instalment Payments:* The remaining cost of the asset is divided into equal monthly instalments, which the buyer pays over a specified period, often ranging from one to five years.

3. *Balloon Payment:* Unlike a standard hire purchase agreement where the last payment settles the entire cost of the asset, a Hire Purchase with a balloon payment includes a large final payment, known as the balloon payment. This payment is due at the end of the agreement and is usually higher than the regular instalments.

4. *Ownership:* While the buyer has possession and use of the asset throughout the hire purchase period, ownership is transferred to the buyer only after the final balloon payment is made. Until then, the seller retains legal ownership.

5. *Interest Rates:* Interest is charged on the outstanding balance of the asset's cost. The interest rates can be fixed or variable and are specified in the Hire Purchase agreement.

6. *Terms and Conditions:* The terms and conditions of the agreement, including any penalties for late payments or default, are outlined in the contract. It's essential for both parties to clearly understand and agree upon these terms.

7. *Option to Purchase:* In some agreements, the buyer may have the option to purchase the asset before the end of the agreement by paying the balloon amount early.

Hire Purchase with a balloon payment allows the buyer to enjoy lower monthly payments during the agreement but requires a significant lump sum payment at the end. This financing option is suitable for individuals or businesses that expect to have the funds available to make the balloon payment when it becomes due. It's important for both parties to carefully review and understand the terms of the agreement before entering into a hire purchase with a balloon payment. Legal and financial advice may be sought to ensure a clear understanding of the contractual obligations and implications.