HP car finance deals explained

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What are HP car finance deals?

A Hire Purchase finance agreement is one of the most common ways to purchase a car, as you can easily spread the cost over several years.  HP car finance deals are excellent for the young driver who wants to own the car eventually!

How does HP finance work?

Essentially, you take out a loan from the dealer that’s secured against the car. However, once you’ve paid back the contract’s last payment (called an Option to Purchase Fee), you now own the vehicle outright. You can keep it, sell it, donate it to a mate – whatever you want. It’s all yours!

As you will eventually own the car, you’re going to have pretty high monthly repayments compared to a lease or PCP. But as you’re going to own it, you can drive as much as you want, and you don’t need to worry about any accidental damage (as long as it doesn’t bother you).

You can opt to put a deposit down at the start of the contract, but there’s plenty of 0% deposit HP deals available nowadays. The monthly fee will depend on the deposit size – as well as how long the agreement is for, what car you opt for, and the interest rate.

To sign up for an HP car finance deal you’ll need to pass a credit check. If you have bad credit, you might still get a deal, but the interest rate won’t be as generous. However, there are still plenty of poor credit history car finance options available to you.

What are the pros and cons of HP?

There are several pros and cons to a Hire Purchase deal:


  • You will eventually own the car, so you’re not just paying interest!
  • In most instances, you can drive as much as you want.
  • You can spread payments (usually) from 3-5 years.


  • As you’re paying off the vehicle’s total cost (plus interest), your monthly payment options will be higher than other options. (like a PCP or a lease).
  • While you will own the car, you don’t during the contract’s duration – so you can’t modify or sell the vehicle without getting approval from your lender.
  • The future valuation of the car isn’t guaranteed. Do your homework and check if the vehicle you’re going for is prone to rapid depreciation.

Is HP the right option for me?

A Hire Purchase is an excellent option for the young driver who wants to own a car outright eventually.

Similarly, if you’re pretty happy to keep the same car for a while, or you drive a lot for work, a Hire Purchase is the best car finance option.

Hire Purchase vs PCP – what’s better?

A Hire Purchase and PCP deal are probably the most common types of car finance. They’re both quite similar in that you pay a fixed monthly payment to the lender.

However, there are distinct differences.

If you want to own the car, and don’t mind higher repayments, then the Hire Purchase is a better option. You also have no mileage restrictions.

However, if you want lower monthly repayments, and don’t want to own the car, then a PCP is probably a better option. However, you’ll have mileage restrictions.

Also, it’s important to note that you can purchase the car at the end of a PCP deal – but you’ll have to pay a fairly substantial balloon payment to do so.

Hire Purchase vs Car Leasing – what’s better?

A car lease deal couldn’t be any more different than a Hire Purchase deal.

With a car lease deal, you pay cheaper monthly repayments but don’t pay off the car – you have to hand it back, and you’ll be limited by mileage restrictions and car condition requirements.

With the HP car finance deals, you have more expensive monthly repayments, but you won’t have any further payments once paid off. Mileage restrictions or car condition requirements don’t limit you.

Hire Purchase vs Personal Loan – what’s better?

A personal loan and a hire purchase can be pretty similar. The main difference is that you own the car with the personal loan option as soon as you hand the money over to the dealer.

That means you can sell the car or modify it if you want – as long as the bank gets back their money, they don’t care what you do with it.

The downside is that personal loans can often come with higher interest rates than a Hire Purchase, meaning the monthly repayments can be more expensive.