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New or used car finance
- Hire Purchase is a form of new or used car finance. Also called a Hire Purchase agreement or simply HP, it works as its name suggests – you essentially hire the car over the contract period, with a view to purchase it at the end of the deal.
www.moneysavingexpert.com/loans/hire-purchase/
People also ask
What is hire purchase?
What is a hire purchase (HP) & how does it work?
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What is a hire purchase (HP) finance agreement?
What does hp mean on a car deal?
Aug 10, 2022 · What is hire purchase? Hire purchase, or HP, was the most popular way of buying a new car before the introduction of personal contract purchase (PCP) schemes. It’s still popular for used...
- Consumer Editor
Sep 6, 2024 · Hire purchase (HP) is a type of car financing agreement where the loan is secured against the car. With HP you usually pay an upfront deposit and then make fixed monthly payments for an agreed period.
- For HP to be an option, the car you are looking to buy will typically need to meet the following criteria: - It must be for sale at a reputable car...
- The amount you will need to borrow will be the difference between the value of the car you are looking to buy and any up-front deposit you put down...
- If you want to change your car, any outstanding finance outstanding on your current car will need to be settled first. You have two main options: 1...
- Unfortunately, during the term of the agreement you will not own the car and so will not be able to sell it. If you wish to sell the car you will n...
- If you wish to make any modifications to a car that is currently financed with HP then you’ll usually need to obtain get permission from the financ...
- During the term of an HP agreement the car will be owned by the finance company. This usually means bailiffs cannot seize it, but the law is compli...
- You may be able to pay off your hire purchase agreement early, but how this would work will vary depending on your lender. If your lender lets you...
- Whether or not HP or PCP will be better for you will depend entirely on your circumstances and your preferences. HP might be ideal for you if you w...
- Yes, you can get a hire purchase deal on a used car.
- As HP finance is secured on the car you buy, the lender is more likely to approve your application if you’ve missed payments or had CCJs in the pas...
Hire Purchase allows you to pay for a car in monthly instalments. You’ll pay a deposit and essentially borrow money from a finance lender to pay for the car, and make monthly repayments over a set period of time – typically two to five years.
- Andrew Woodhouse
- What Is Hire purchase?
- How Hire Purchase Agreements Work
- Pros and Cons of Hire Purchase
- The Cost of Hire Purchase
- Impact on Credit Score
- Is Hire Purchase Right For You?
- Alternatives to Hire Purchase
- Further Reading and Resources
- Comparing Hire Purchase Deals
Hire Purchase is a financing arrangement that allows you to drive away in a car by paying an initial deposit followed by fixed monthly payments. Once you've made all the payments, including a possible small 'option-to-purchase' fee, the car becomes yours. Unlike some other finance options, there's no large final payment, often referred to as a 'bal...
Deposit
The journey to owning a car through HP begins with an initial deposit. You can pay this upfront or through part exchange. The size of your deposit is inversely proportional to your monthly payments — the larger your deposit, the smaller the subsequent payments.
Monthly Payments
With the deposit out of the way, you'll commit to fixed monthly payments over a set period. It's important to note that failing to make these payments can lead to penalties or, in some cases, the need to return the car.
Registration and Ownership
During the HP agreement, the car is registered in your name, but the finance company retains ownership until you've completed all payments. You're responsible for the car's insurance and maintenance, but you can't sell or modify it until you've paid off the finance.
Advantages
1. Ownership:The car is yours after the final payment. 2. No Mileage Limits:Drive as much as you want without worrying about mileage caps. 3. Accessibility:HP agreements may be more accessible to those with less-than-perfect credit scores. 4. Flexibility:There's often room to negotiate the terms to suit your financial situation.
Disadvantages
1. Dealership Exclusive:HP isn't typically available for private car sales. 2. Repossession Risk:Missing payments could lead to the car being taken back. 3. No Modifications:You can't make changes to the car or sell it before completing the payments. 4. Maintenance Costs:All running costs, including insurance, are your responsibility.
When considering HP, you'll need to account for the deposit and the monthly payments. These payments will vary based on the borrowed amount and the term length, which usually ranges from three to five years. To get a clearer picture of potential costs, a car finance calculatorcan be a valuable tool.
Taking out HP can affect your credit score, but how you manage your monthly repayments will have a bigger impact. Consistent, on-time payments can improve your credit rating, while late or missed payments can cause damage.
HP might be the right choice if you're looking to own a car without paying the full price upfront. However, it's essential to ensure you can afford the monthly repayments and to compare HP with other financing options, such as a car loan or personal contract purchase.
For more in-depth information, consider exploring a guide to personal leasing, the difference between PCP and HP car finance, and whether car finance or a loan is right for you.
When you're ready to compare HP deals, MoneySuperMarket's free service is at your disposal. Enter your details, select a car, and choose a deal that suits you best, all without impacting your credit score. Our guide on the best ways to finance a carprovides further insights, and our car finance calculator can help you estimate the cost of an HP dea...
- Victoria Russell
- Money & Personal Finance Expert
Aug 29, 2024 · What is hire purchase (HP) and how does it work? A hire purchase (HP) finance agreement is calculated to divide the cost of the car, minus any deposit, into a series of monthly instalments.
Hire Purchase (HP) is a type of car finance that allows you to make monthly payments to pay off the cost of a car instead of having to pay the upfront price in one go. Unlike Personal Contract Purchase (PCP) there is no final payment at the end of the contract, you own the car outright.
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