Hire Purchase: The Ultimate Guide

Spreading the cost of buying a car holds huge appeal for most motorists. Rather than handing over your savings to get your next new vehicle, choosing a form of car finance means that you can budget for a series of fixed and affordable monthly payments.

Hire purchase (also referred to as HP) is one of the most popular options for customers looking to finance their next car. Take a look at our ultimate guide to Hire Purchase agreements, and find out more about how Hire Purchase can help you get behind the wheel of a safe and reliable car.

What is Hire Purchase Car Finance?

As the name suggests, Hire Purchase is a form of car finance which offers car buyers the opportunity to effectively ‘hire’ their car from a lender for a predetermined amount of time, with the option of purchasing the vehicle at the end of the contract.

On a Hire Purchase agreement, your monthly payments are calculated in order to repay the amount you have borrowed, plus interest, in a way that fits within your own budget. It is an excellent option for anyone wishing to drive a better, more reliable car without the financial burden of a cash purchase.

Below, we look at some of the benefits of Hire Purchase, and what you should expect from a Hire Purchase agreement.

The Benefits of Hire Purchase

Hire purchase carries many benefits for car buyers, from ensuring that you get a great car at an affordable rate, to giving you some flexibility at the end of the contract. Here are some of the top reasons to choose Hire Purchase for your next car finance agreement.

  • A Flexible Deposit

    With a Hire Purchase agreement, you are able to decide the size of the deposit. Whereas some car financing options stipulate the upfront cost, choosing Hire Purchase means that you only pay an amount that you are comfortable with, which means you can retain some savings for the future.

  • Easy Monthly Budgeting

    Cheap car finance deals are a great option for any car buyer who wishes to spread the cost of a new car, rather than facing the financial burden of a single, upfront payment. Since the interest rate remains fixed throughout, you will be able to budget for your loan repayment each month, without worrying about any increases.

  • No Mileage Limits

    Some car finance options will specify a yearly mileage limit, which must be followed for the duration of the contract. A higher mileage allowance will entail a higher monthly payment, and if this limit is exceeded, then the driver will incur a fine which must be paid at the end of the agreement. With Hire Purchase, this is not the case, and you will be free to use your car as-and-when it is needed.

  • A Fast Response

    We understand that, when you need a new car, you need to be able to get it as soon as possible. Applying for car finance is fast and simple, and may even mean that you can drive your new car the same day that your application is completed.

  • A Better, More Affordable Car

    Many people struggle to afford a good quality car through cash purchase, and may feel forced to settle with an unreliable or old vehicle that fits within their budget. Financing a car through Hire Purchase means that the cost can be divided into many smaller payments, which circumvents the need for a long and tedious saving period, and means that you are driving a car you can trust.

Applying for Hire Purchase Car Finance: What to Expect

The process of applying for car finance has never been easier, and an application for a free finance check takes moments. There are a few things you should expect when applying for Hire Purchase car finance.

Before Your Contract

If you want to know more about the deals available to you, the first step is to fill in our online application form. As soon as we receive your details, our team will be able to review your situation and find a cheap car finance deal through one of our trusted lenders.

You will be required to let us know about your credit score, as this influences the options available to you. If you have bad credit, then you may have found it difficult to secure a cheap car finance deal in the past; even if you have been rejected by other brokers, our team at Car Finance Giant have the right experience and understanding to secure you a great deal on your next car.

You will also need to decide the duration of your contract, which typically falls between one and five years, and the deposit you wish to put down at the beginning of the agreement. We are able to offer plenty of options, which is a fantastic solution for anyone who wants to hold onto their savings, or bypass a long saving-up period.

Your payments will then be calculated based on the amount you are borrowing to cover the cost of the vehicle, the length of the contract, and the rate of interest on your loan.

Once you have been guaranteed car finance, you will be free to choose your car from a UK dealer. You will fill in some paperwork at the dealership, and either get straight behind the wheel of your new car, or arrange for it to be delivered to your home.

During Your Contract

Making your payment each month is very simple, and can be paid automatically through a standing order with your bank, or completed over the telephone. Our loans always come with fixed APR, , which means that you will always be able to budget for the same cost, and won’t run into any unexpected costs.

Unlike PCP, a Hire Purchase agreement does not feature a mileage allowance, so you will be free to drive your car as much as you wish -- although it is important to remember that the lender maintains ownership of your car for the duration of the agreement.

After Your Contract

At the end of a Hire Purchase agreement, you have the option of making a final payment in order to gain full ownership over the vehicle. Because of the way that your monthly payments are structured with Hire Purchase, this final payment is typically very low, and will mean that the car is yours for as long as you want to keep it.

If you do not wish to take ownership of the car, then all you need to do is hand back the keys and walk away.

Bad Credit Car Finance

Since lenders will look at your credit history to determine your reliability as a borrower, many car financing companies will turn down car buyers who have a poor credit score.

If you are looking for bad credit car finance, then we can help. At Car Finance Giant, we understand how difficult it can be to improve a bad credit score when lenders are unwilling to offer loans and finance. Our team have a wealth of experience in securing car finance for drivers of all financial circumstances and histories, and feel sure that there is a loan out there to suit you.

Hire Purchase FAQ

If you think Hire Purchase might be the right option for you, but want to know a little more before you apply, then take a look at some of the most commonly asked questions below.

What is the Difference Between PCP and HP?

If you have heard of Personal Contract Purchase (PCP) before, then you may be wondering how it differs from a Hire Purchase agreement. While it’s true that PCP is a form of Hire Purchase, there are a few key differences to consider before you decide which option is best for you.

With a Hire Purchase agreement, the total amount you borrow in order to cover the cost of the car is repaid over the course of your agreement. Your monthly payments will be calculated based on the cost of the vehicle, minus any deposit you choose to put down; the exact amount you pay each month will also depend on how long you wish for the agreement to last, and your rate of interest.

By the end of your contract, you have the choice of taking full ownership of the vehicle. Due to the way the payments are calculated, you will be able to make a low, final payment to the lender. At this point, the car will be yours.

With a PCP contract, your monthly payments tend to be lower, as they are calculated based on the depreciation of the vehicle over time. What this does mean, however, is that the final payment is higher than it would be for Hire Purchase; this is often referred to as the ‘balloon payment’, which must be made in order to gain ownership of the car at the end of the agreement.

Can a Hire Purchase Contract Be Settled Early?

If your circumstances change and you wish to settle the loan before the end of your contract, then all you need to do is get in touch, and a member of our team will be able to provide you with a quote for the total outstanding amount that you need to pay. Obviously, this amount will vary throughout the course of your agreement, but we will be able to let you know how long the quote will be valid for.

What Hire Purchase Car Deals Are Available?

As soon as you have been guaranteed car finance, you will be free to spend your credit on any car you choose — provided it is being sold by a reputable UK dealer. One of the greatest benefits of choosing to finance your next car is that there will be a wider array of choices available to you; cars that may be outside of your budget, or require a long period of saving up for a cash purchase, are made affordable through manageable monthly payments.

We also have an exclusive members’ database of over 300,000 cars. Whether you’re looking for something to carry the whole family, or need something compact and economical for city-driving, we are confident that you will find the right car through cheap car finance deals.

Will I be the Legal Owner of the Car?

Hire Purchase is a finance option that is secured against the vehicle, which means that the lender will retain legal ownership over the car until you have made your final payment. You are effectively ‘hiring’ the car from the lender for the duration of the contract, which means that you will not be able to modify the car without permission from the lender.

How Long Will the Contract Last?

Typically, Hire Purchase car deals will last between one to five years. It is your decision whether you want to repay your loan over a shorter or longer period, but it is worth remembering that the length of the agreement determines the amount you will be required to repay each month.

Get in Touch

At Car Finance Giant, we are committed to finding the right deals for the right people. We believe that car finance is an excellent option for everyone, regardless of financial circumstance, credit score, age or occupation. Our team have a great deal of experience in finding cheap car finance deals that can be managed within any monthly budget, and are always available to answer any questions or concerns you might have — wherever you are in your car finance journey.

Our online application form is fast and easy, and we always respond on the same day that we receive it. Applying for car finance should not be a complicated process, and we aim to make it as simple as possible. Our innovative technology ensures that we can make fast and effective searches through our database of trusted lenders, which may mean that you are able to collect your car on the same day that your loan is approved.

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