HP Finance

Hire Purchase Financing

When investing in either a new or used car, it's always important to ensure you are securing the best value for money possible. Key to getting the best deal for any vehicle is the finance arrangement you take out to fund the purchase. Among the most popular agreements available in the automotive trade is a Hire Purchase contract, which enables you to invest in the model of your choice for an affordable cost.

Car HP FCA

How does Hire Purchase work?

The principles of a Hire Purchase agreement are simple: you are, in essence, hiring the vehicle for an agreed period of time, with the option to purchase at the end. What this means is that the financing company is the de facto owner of your vehicle throughout the entirety of the arrangement; transfer of ownership to you only occurs at the end of the term and once you have also paid the ""option to purchase' fee. This does, however, mean that should you be unable to pay for the car, the financing company has the right to repossess the vehicle.

In order to make purchasing a new or used car as affordable as possible, Hire Purchase agreements are often flexible in the duration of the contract and the level of deposit you pay. So, should you wish to pay a deposit of 20% over the course of four years, you can look forward to lower monthly repayments. You may also find special offers that provide a deposit contribution to the vehicle of your choice, meaning the monthly repayments are lowered even further.

At the end of the agreement, you will be presented with the option to pay the ""option to purchase' fee, thereby enabling you to take full ownership. Since this is usually a payment of only a few hundred pounds, and the balance of the vehicle's value has already been paid off, it makes sense to pay this sum.

What are the benefits of Hire Purchase?

  • Spread the cost of your new or used car over an agreed period of time
  • Own the vehicle outright at the end of the agreement, subject to paying the ""option to purchase' fee
  • Choose your deposit to reduce the monthly repayments
  • Flexible contract agreements ranging from one to five years
  • Low rates of APR - sometimes 0% - are often available
  • More chance of acceptance by lenders due to the vehicle being used as collateral