Hire Purchase (HP) is a straightforward way to finance a car, allowing you to spread the cost over manageable monthly instalments. You begin with an initial deposit and borrow the remaining amount from a lender, which you repay over a fixed period, typically ranging from 12 to 60 months.

During the term of the agreement, you'll be the registered keeper of the car, responsible for its insurance, servicing, and maintenance. However, the lender remains the legal owner of the vehicle until the final payment is made. This means you cannot sell the car without the lender's permission, and if you miss payments, the lender has the right to reclaim the vehicle.

The process is simple: after paying the initial deposit, you make regular monthly payments. Once this last payment is completed, ownership of the car legally transfers to you, giving you the freedom to keep it or sell it as you wish. Hire Purchase is an attractive option for those looking for a clear path to car ownership while spreading the cost over time.

Hire Purchase (HP) is a popular option for spreading the cost of a car over time, but it comes with both advantages and drawbacks that are important to consider.

Advantages of Hire Purchase:

• Fixed Payments: HP offers fixed monthly payments with set interest rates, making it easier to budget for your car expenses.
• Low Deposit: The initial deposit is typically around 10%, making it relatively affordable to get started.
• Flexible Terms: You can choose a contract length and repayment terms that suit your financial situation.
• No Balloon Payment: Unlike PCP, HP doesn't require a large final payment to own the car outright.
• Extra Protection: HP can offer some protection if there's an issue with the car, as the finance company or retailer may be liable - be sure to check your contract for details.
• No Mileage Limits: Unlike PCP, HP doesn't come with mileage restrictions, so you're free to drive as much as you like without incurring extra charges.
• Ownership at the End: Once you've made all the payments, the car is yours to keep, sell, or trade in.
• Applicable to Used Cars: HP can be used to finance both new and used cars, giving you more options when choosing your vehicle.

Drawbacks of Hire Purchase:

• Higher Monthly Payments: HP typically has higher monthly payments than PCP, as you're paying off the full value of the car.
• Early Termination Fees: If you want to end the agreement early, you may have to pay a fee. Even if you're up to date with payments.
• Repossession Risk: If you miss payments, the lender has the right to repossess the car and you risk losing the money you've already paid.
• Selling and Modification Restrictions: You cannot sell or modify the car without the lender's permission until all payments are complete and ownership transfers to you.
• Potentially Higher Interest: The interest rates on HP agreements may be higher compared to other finance options like PCP, making it more expensive in the long run.
• Not Ideal for Short-Term Ownership: If you don't plan to keep the car at the end of the finance term, HP might not be the best option for you.

HP can be a great way to finance a car, but it's essential to carefully consider these factors and ensure it aligns with your financial goals and driving needs.

Consider a Hire Purchase (HP) agreement if:

• You intend to keep the car at the end of the finance term.
• You prefer not to be limited by mileage restrictions.
• You want to spread the entire cost of the car evenly, without a large final payment.

You're looking to finance the purchase of a used car.

A Hire Purchase (HP) agreement is calculated by subtracting the deposit from the total purchase price, with the remaining balance spread over a series of monthly payments and a small final fee.

Eligibility depends on several factors, including your credit score, income, spending habits, and any existing debts. The value of the car you want also plays a role - be sure you can afford the monthly payments. If necessary, consider a more affordable car.

Yes, the lender will typically perform a credit check as part of your application. This will appear on your credit file, and too many checks in a short space of time can affect your credit rating so try to avoid that if possible. Learn more about credit ratings, and what to do if you have a bad credit rating.

In a typical Hire Purchase agreement, you'll make a deposit of at least 10% of the total price, although the exact amount may vary depending on your specific agreement.

Once you've completed your Hire Purchase agreement, the car is yours to do with as you wish.

Although you can't transfer the agreement to a new model like you can with many PCP agreements, the car becomes your legal property, allowing you to sell it and use the funds toward another vehicle if you choose.