Hire Purchase (HP) Explained
Hire Purchase Finance Made Simple: Discover how this flexible payment option works and find out if it's the right choice for your next vehicle
Car finance can be an ideal solution for breaking down the cost of vehicle ownership into manageable chunks, but it’s important to choose the right plan for you. You may have come across the term Hire Purchase (HP) finance. But what exactly does it mean, and how does it work? We’re here to break it down in a simple and straightforward way.
What is Hire Purchase finance?
In simple terms, HP finance allows you to spread the cost of your car over time. Instead of paying the full amount for the car at once, you make monthly payments over an agreed period (usually between 12 and 60 months). This means you can drive away in your new car right away, but pay for it over time.
With HP finance, the car is technically owned by the finance company until you’ve made the final payment. But don’t worry – you can still use the car as you would with full ownership, and the moment you make that final payment, the car is yours to keep.
Key benefits
- You own the car at the end
- Fixed monthly repayments
- Up to five years to pay back
- No final large payment
- The loan is secured on the car, not your home
- If you repay early, you can save some of the interest charges
Is HP finance right for you?
If you’re thinking about buying a car on finance, HP finance could be a good option if you want to own the car outright at the end of the agreement and prefer fixed monthly payments, making it easier to budget. It’s ideal if you’re not ready to pay for the car in full upfront but still want full ownership once the agreement is finished.
Depending on your budget and needs, you can choose a payment term that works for you. Whether you want to pay off your car quickly or take a bit more time, HP finance can be adjusted to suit your lifestyle.
The monthly payments will be higher than a Lease Purchase or PCP agreement, but you won’t have a larger final payment.
How Does Hire Purchase Finance Work?
Here's a simple step-by-step guide