Hire Purchase Explained

Hire Purchase (HP)

This is a very straightforward form of car finance. You choose the car; the finance company pays the dealer for it. You then hire the car from the finance company, taking responsibility for it and making monthly payments until you have paid the total amount owed. At the end of the repayment period, you have the option to take ownership of the car.

Are the monthly repayments fixed?

Yes. Your finance agreement will detail exactly how much you are expected to pay and when.

What repayment periods are available?

Usually 12–60 months.

Do I need to pay a deposit?

We usually recommend that a deposit of at least 10% is put down, as although a deposit is not always strictly necessary it can improve the rates you are offered on your finance arrangement.

Who is HP best for?

People who want to own their own car in the long term and can’t get or don’t want a personal loan.

Who owns the car?

The finance company owns the car during the repayment period. If at the end of the term you take up the option to purchase, the car becomes legally yours. As you’ve paid off the cost of the car by this point, all you pay is a small admin fee. This is typically between £100 and £200.