Hire Purchase (HP)

Hire purchase (HP) is a finance agreement where you hire the car for a set period of time by paying fixed monthly payments. Then at the end of the agreement you have the option to become the legal owner by paying an option to purchase fee.

What is HP?

How does it work?

Your fixed monthly payments will be based on how much you want to borrow and the length of your agreement, which is usually between 1 and 5 years. During this time you are the registered keeper of the car and responsible for insurance, road tax and maintenance. Anytime during or at the end of your agreement, you have the option to pay the balance in full, including an option to purchase fee, and become the legal owner of the vehicle.

What are the advantages?

flexible terms usually between 1 and 5 years.
after all payments are made, including the option to purchase fee, the car is yours.
there are no mileage restrictions.

What you need to be aware of

monthly repayments are often higher than for a personal contract purchase (PCP) as there is no deferred payment at the end.
you don’t own the car until you pay the option to purchase fee.
you can’t sell or modify the car before you become the legal owner.
if you fail to make your repayments, the finance company can repossess the car.

Initial payment:

an initial payment may be required.

Fees:

usually there is an arrangement fee. This may be included as part of the monthly payments.

option to purchase fee.

Restrictions:

the finance company may impose certain restrictions on usage and location of the vehicle, so always check.

Ending the agreement:

Once all the repayments have been made, including the option to purchase fee, the car becomes yours. You can choose to repay the finance company early however you may be charged penalties.