Car Hire Purchase (HP) finance
With car Hire Purchase you are the “registered keeper” but not the owner. You cannot sell the vehicle without the Lenders permission but at the end of the agreement, you will own the car
How does car Hire Purchase work?
With car Hire Purchase deals, the finance is secured against the car and the finance company remain the owner of the vehicle until final payment.
For the term of the HP car loan, you are the ‘registered keeper’ and responsible for insurance and maintaining the vehicle.
You can buy the car outright by paying an “Option to Purchase” fee at the end of the hire purchase agreement.
The loan period is between three and four years; repayments are monthly fixed rate APR. (Annual Percentage Rate).
Note: A “Conditional Sale” agreement is similar to Hire Purchase, except on final payment you automatically own the car.
Buying a car through Hire Purchase
You can get a car Hire Purchase agreement from a car dealership or direct with a car manufacturer. Taking out HP finance through a car finance broker allows you to buy a car from any dealer.
Once you have agreed to terms with your Lender, you can choose a car.
The Lender and dealer sort documentation and payments on your behalf, and when completed you drive away in your new car.
At the end of the Hire Purchase deal
On completion of an HP car loan, (after final payment), you have the option to purchase the car outright by paying an ‘Option to Purchase’ fee, this sum covers the cost of transferring ownership of the car to you.
Pros of HP car finance
- Quick and easy to arrange.
- A low deposit (about 10%). Some lenders offer no deposit loans.
- Payment terms between 36 and 60 months.
- Fixed monthly repayments for the duration of the contract.
- Unlike other finance, an HP car loan does not impose mileage restrictions.
- Credit agreements regulated by the FCA, mean you have rights and protections under the law.
Cons of an HP car loan
- You are not allowed to sell the car without the finance company’s permission.
- The repayments are more for car Hire Purchase than other forms of car finance; because over the term of the contract you pay the total value of the car with the option to purchase.
- You are not the legal owner of the car until all repayments are complete, and you have paid the “Option to Purchase Fee”.
- The Lender can repossess the car if you fail to make your payments, but, after a stated amount (in the contract) has been repaid the Owner will require a Court Order to take back the car.