Hire Purchase (often known as HP) is a common way to finance a car.
But what makes it different from other financing options, and why might it be the right – or a wrong – way for you to finance your next car? Read on for a full guide to HP finance.
If you take the term Hire Purchase (commonly abbreviated as HP) somewhat literally, you’re essentially hiring a car from your finance company with the intent to purchase it.
You don’t own the car until the end of the agreement (it’s property of the finance company, similar to financing something like a TV) but once you make your final payment, the car is legally yours.
As far as finance agreements go, HP is a simple one to break down.
You’ll pay an initial deposit followed by a number of set monthly payments and a small final fee — often as little as £10.
Agreement lengths do vary, but you’ll usually find deals lasting anywhere from 12 to 48 months.
Once you’ve made your final payment, the car is legally yours so you can keep it or sell it on – the choice is yours.
You can buy a new car on an HP agreement through carwow, just head over to the deals page by tapping the green button below to find the latest offers.
HP agreements are often available on used cars too. If you’re unsure if a dealer is offering HP on the car you’re interested in, don’t be afraid to ask them.
You may want to consider an HP agreement if:
If you don’t think HP is the right type of finance for you, there are other options, including paying with cash.
An alternative type of finance is Personal Contract Purchase (PCP). You can find a comprehensive guide by tapping the green button below, but in simple terms, you pay a deposit and a series of monthly payments, before being given the option to return the car when your finance term ends or paying a final ‘balloon’ payment if you want to own it outright.
Leasing is another method. This is similar to renting a car – you’ll pay a monthly fee over a set period of time, though you don’t have the option to keep the car at the end of that agreement. Tap the green button below for more details on how that works.
A Hire Purchase finance agreement is calculated by subtracting the deposit amount from the total price to pay, with the rest spread over a number of monthly payments and a small final fee.
Typically, a Hire Purchase agreement sees you place at least 10% of the total price — though this will vary depending on your specific agreement.
Once you’ve completed your monthly payments and paid the small final fee, you’ll own the car outright.
You can pay to end your Hire Purchase agreement early if you so wish. Just inform your provider of your intent, and they’ll offer you a settlement fee — usually one lump sum calculated from any unpaid installments and interest.
If you wish to terminate your agreement and hand the car back, you can do so under voluntary termination.
The exact terms of this will be set in your agreement contract, but typically you’ll need to have paid off at least half of the total amount and you’ll have to hand the car back to the dealer.
Once you’ve paid off your Hire Purchase agreement, you’re free to do whatever you wish with the car.
Though you can’t transfer the agreement directly into a new model (as you can with many PCP agreements) the car is your legal property so you’re free to sell it and put the money towards another car.
* Please contact the dealer for a personalised quote, including terms and conditions. Quote is subject to dealer requirements, including status and availability. Illustrations are based on personal contract hire, 9 month upfront fee, 48 month term, 8000 miles annually, inc VAT, excluding fees. Vehicle returned at term end.
