Buying a Car: Hidden Traps in Installment Purchase Deals

  • Payment in installments is very enticing. It has enabled many people to own property that they would otherwise not have been able to afford. 

    Thousands of newly employed young people rush to commit their present and future incomes to the hire purchase model when it comes to buying their first car.

    Worryingly, thousands of them have also ended up in depression and millions in losses following such deals.

    Speaking to, a car seller based in Mombasa (who preferred anonymity) revealed that at least 60 percent of customers ended up defaulting on the mandatory monthly payment required under this model of purchase.

    File image of Kenyan banknotes

    File image of Kenyan banknotes


    “We reclaim and sell these cars again at a good price. We don’t refund any money. It’s stipulated in the fine print of the contract. It is very painful and it has put so many into depression,” he confessed.

    Buying a car on hire purchase is like taking a mortgage. It allows one to possess the property after paying a deposit, often 10 percent of the total price and spread the balance over several months or even years, depending on the agreement.

    Ownership of the property, however, does not pass to the purchaser until payment of the last installment and interest.

    If you log in on Facebook and search ‘cars for sale’ you will see thousands of advertisements on cars from different people indicating very lucrative deposits on new cars.

    However, most are unaware of the hidden costs that come with opting for the installment payment model.

    For example, a buyer will be required to pay Ksh20,000 for a tracker and annual comprehensive insurance despite the car’s ownership still being in the hands of the seller.

    Additionally, the higher purchase model will drive the price of the car up by at least Ksh100,000 by the end of payment period.

    Being mandated to pay sums of up to Ksh70,000 at the end of every month has proven to be tough for most who enter into these deals blindly. Most end up defaulting which then attracts hefty fines.

    The Hire Purchase Act allows sellers to repossess property towards the recovery of arrears.

    Buyers also have an opportunity to terminate the transaction through a notice in writing to the retailer if they experience hardships in payment. 

    The goods (car) must, however, be as good as new because returning them in a poor condition may attract a suit by the retailer seeking damages.

    This method of payment has its advantages as well such as the fact that the buyer having immediate use of the car once the agreement with the vendor has been signed off.

    However, hire purchase agreements aren’t free. As with all forms of financing, you’ll pay a fee for spreading the cost. Many hire purchase schemes can prove quite costly in that regard.

    To be on the safe side, first-time car buyers are advised to seek counsel from car owners, read through any contracts with the help of legal counsel prior to signing and ensure they carry out proper due diligence prior to buying a car.

    Thousands of Kenyans have shared detailed stories of how they lost millions to shady car dealers.

    Imported cars await to be cleared at a local Clearing Freight Station (CFS) in Mombasa

    Imported cars await to be cleared at a local Clearing Freight Station (CFS) in Mombasa

    Daily Nation

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