HP Finance - What is it?

The world of car finance can be a challenging one to navigate, with so many different options, terms and acronyms. HP, or hire purchase finance, is what we’ll be going into more depth with today, as one of the most popular car finance options thanks to buyers being able to own the car outright at the end of their finance contract. 
 

How does hire purchase finance work?
 

Hire purchase is a form of car finance that allows you to spread the cost of a car over a set period of time (loan term). It’s similar to a mobile phone contract, in that you’ll pay an initial deposit towards the car (usually around 10%), although you don’t have to, and the finance lender will loan you the remaining amount with added interest charges from borrowing the money. You’ll then pay this money back over monthly instalments over an agreed period you’ve set out with the finance lender.

You’ll likely end up paying back more than you borrowed due to the interest, however, both the interest rates and monthly payments are usually fixed, helping you budget better.

Both the deposit and length of the contract can usually be adjusted, in order to help you find monthly payments that fit your budget.

Car finance agreements are secured against the car, so if you’re unable to keep up with your monthly repayments, the finance lender could repossess your car.

Pro’s of hire purchase car finance 

Fixed monthly repayments and interest rates

You’ll always know where you stand with your payments when taking out a hire purchase car finance agreement, and therefore you’re able to budget better. But do remember, the longer the term, the more interest you’ll pay.

Flexible repayment terms

Repayment terms usually cover 1-5 years, meaning you can reduce your monthly repayment amounts by choosing a longer-term making it affordable to your lifestyle.

Less restrictions 

Compared to other car finance deals, such as lease agreements and personal contract purchase, there are no mileage or condition restrictions, because the arrangement is for the car to be yours by the end of the agreement. 

You have the option to pay it off early

Depending on the finance lender, they can allow you to settle your agreement earlier, either partially or fully. However, some do only allow you to do this after you’ve made a certain amount of repayments, so it’s best to check with your individual finance company and read the terms and conditions.

Get accepted even with a poor credit score

Typically HP has the highest approval rate of all car finance options as the car is used as collateral and is often available to people with a less-than-perfect credit history.

At the end of the agreement, the car is yours

Unlike a personal contract purchase where you have to pay a lump sum at the end in order to own the car, or a car leasing deal where you effectively just rent the car, when once the contract is over, that’s it, the car is yours.

Interested in finding out more about hire purchase to see if it’ll work for you? Contact our finance team who will answer all your questions.

If you think hire purchase sounds like the option for you, you can use our free finance checker, which will tell you if you could be approved without affecting your credit score. There’s no cost and no obligation. You can also use our online finance calculator to get an idea of your monthly repayments based on your deposit.

Once you’re happy, you can use our safe and secure online application form and apply.

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