Hire Purchase (HP) is one of the most popular ways to finance a new car in the UK. With HP car finance from us, you can drive away your dream car with a relatively low deposit and affordable monthly payments. Keep reading to learn everything you need to know about hire purchase agreements and why we should be your first choice for HP finance.
How does hire purchase work?
Hire purchase agreements allow you to pay for a car in instalments over an agreed period of time, usually between 1 to 5 years. Here's how it works in three simple steps:
- You pay an initial deposit, typically 10-20% of the car's value. This secures the hire purchase agreement.
Apply for your loan
- You take ownership of the car immediately and start making monthly payments over the term of the agreement.
Receive the money
- Once you've made all the payments, including any final "balloon" payment, ownership of the car is fully transferred to you.
Pay it back over time
Comparing HP with other finance options
By providing defined ownership on flexible terms, hire purchase finance stands out as a preferred financing method for many car buyers.
| Finance features: | Hire purchase (HP) | Personal contract purchase (PCP) | Personal loan |
|---|---|---|---|
| Requires initial deposit | Optional | Optional |  |
| Car is yours at the end of the agreement |  | Optional | |
| Fixed monthly payments | | | |
| Optional balloon (final) payment | | | |
| Avoid excess mileage charge | | | |
| Secured against an asset (e.g. a car) | | | |
| Support with vehicle issues | | | |
How to calculate your Hire Purchase (HP)
Figuring out potential hire purchase monthly payments is straightforward:
- Note the purchase price of the car you want. This is how much the car costs excluding any deposit.
- Decide the deposit amount you can pay upfront. Typically 10-20% of the purchase price. The higher the deposit, the lower the monthly payments.
- Choose the hire purchase agreement term, usually 12 to 60 months. Longer terms have lower monthly payments but higher interest.
- Subtract the deposit from the purchase price to get the amount being financed.
- Divide the financed amount by the term in months. This gives you the estimated monthly payment.
- Add interest, which is typically 8-10% of the financed amount.
HP Calculator
Use our hire purchase calculator to estimate your monthly payments. Just enter the purchase price, deposit amount, and agreement term, and our calculator will estimate your monthly instalments. Having an idea of potential monthly costs makes it easier to budget for HP finance.
Finance calculator
- 36months
- 42months
- 48months
- 60months
This helps you get a more accurate finance estimate
These estimates are subject to credit checks, and may change if you do apply for finance.
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| Loan amount | £7,500 |
|---|---|
| Length of Loan | 60 months |
| Monthly payment | £0 |
| Interest rate | 9.9% APR |
| Optional final payment | £0 |
| Amount of interest | £0 |
| Total payment | £0 |
Getting a car on Hire Purchase with bad credit
Even if you have less-than-perfect credit, you can still get approved for hire purchase car finance. Here's how it works:
The lender finances a large portion of the car's value, so your credit only needs to be good enough for the remaining monthly payments. We understand bad things can happen and look at your whole financial situation, not just your credit score.
With hire purchase agreements, the finance company owns the car until you finish all payments, so it's lower risk if you have bad credit. We can often approve those who might be declined elsewhere.
Will my monthly repayments be higher if I have bad credit?
For applicants with lower credit scores, monthly payments may be slightly higher. This covers the increased risk. But for many, the difference is manageable, usually under £20 per month. We'll be transparent about any credit-based rate differences.
Do I need a deposit for hire purchase cars for bad credit?
Most lenders do require a 10-20% deposit even with bad credit. This shows you are financially committed. However, we understand unique situations. We can sometimes arrange HP finance with no deposit if you have steady income.
Advantages & disadvantages of HP car finance
Hire purchase offers these key benefits:
- Get the car now and build ownership over time
- Monthly payments are usually lower than other financing
- Only a deposit is required upfront, not the car's full value
- Flexible terms of 12-60 months are available
Potential downsides to consider:
- You cannot own the car outright until all payments are made
- Monthly payments are fixed over the agreement term
- High mileage or damage can result in extra fees
- Early settlement may involve charges
Is HP car finance suitable for me?
HP car finance is a great option if you:
- Want lower monthly payments than other financing
- Don't have cash to buy a car outright
- Prefer ownership over leasing or long rentals
- Have stable income but limited savings for a large deposit
- Need flexibility in monthly payments and agreement term
Speak to our car finance experts to see if hire purchase agreements suit your budget and ownership goals.
Why choose us?
Here's why we should be your trusted partner for hire purchase agreements:
- Simple application process with fast approval decisions
- High approval rates, even for those with poor credit
- No hidden fees or surprises - we're upfront about all costs
- Personal support throughout your agreement term
- Competitive interest rates on par with major lenders
- No penalties for early settlement
- We work with over 20 top dealerships across the UK
Meet our car finance lenders
We work with over 15 lenders offering 100+ HP and PCP deals so that you could have the best offer.
FAQ's
- What is a hire purchase?A hire purchase (HP) agreement allows you to finance and pay off a vehicle over 12-60 monthly instalments. You take ownership immediately but the finance company owns the car until the final payment. HP offers lower monthly costs than other financing options.
- Your rights in an HP agreementHP agreements give you the rights to use the vehicle like an owner, as long as you make the contractual payments. You're responsible for insurance, maintenance, and avoiding excessive mileage or damage fees. You have consumer rights against misrepresentation or faulty vehicles.
- How does the interest rate for a Hire Purchase agreement work?Interest is applied on top of the outstanding balance, so rates are typically 8-10% of the original amount financed. This covers the finance company's costs and profits. Interest decreases over time as the principal is paid off. Rates vary by applicant credit.
- What happens if I fail to keep up with the payments under a Hire Purchase agreement?If you fall behind on payments, the finance company can repossess the car and cancel the agreement. Any payments made will be forfeited. Before taking this action, we make every effort to work with customers facing financial difficulty. Get in touch immediately if you anticipate missed payments.
- Can I cancel an HP agreement before the final payment?You can choose to settle your HP agreement early, but cancellation fees and interest for the remaining term may apply. We recommend reviewing the original agreement to understand early termination costs. Our team can discuss options if you wish to exit the contract.
- Will I pay more with Hire Purchase than the vehicle is worth?The total payments over an HP term are typically more than the car's cash price due to interest charges. However, monthly instalments are affordable and you own the car throughout the agreement. At the end, you have an owned asset - which you don't get with other finance options.
- Can you sell a HP car?Selling a vehicle with outstanding HP finance requires settling the agreement first, either via a lump-sum payment or refinancing the remaining term. Otherwise, the finance company remains the registered keeper until all instalments are paid. Our team can explain the options if you wish to sell.
- What if there's a problem with the car?For mechanical issues, contact the dealer as you have consumer rights under the original sale agreement. For problems with the HP finance agreement itself, such as affordability concerns, our team can advise on the best solution for your situation.
- Can you modify a car on HP?Modifying a hire purchase vehicle like tuning it or installing non-standard parts will violate the agreement unless you obtain permission from the finance company first. Unauthorized modifications can result in the car being repossessed.
- Can I pay off my HP early?Yes, you can choose to settle your HP agreement before the final payment. Be aware that interest for the remaining months may still be payable. Review your agreement terms or contact us to understand any early settlement fees.