Hire Purchase Explained

Hire Purchase Explained

Advice and Tips // 12 April 2016

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If you haven’t heard about hire purchase car finance, you may be wondering exactly what it is and how it could work for you.

Hire purchase is a popular method of car finance in the UK, and the deals you get will split the costs of a new car.

Hire purchases are easy to set up and are available to most customers through whichever dealer of their choice – and may even be available to you if you have a bad credit rating. Reasons for this are simple; the loan is secured against the car itself with the car being used as a borrower’s pledge. Payments are usually made on a monthly basis as most car finance deals are. However, payments will be lower than those of personal loans as there is no lump sum to be made at the end.

As with all loans, if you do not keep up with your monthly payments, your car could be taken away. However, with hire purchase, you should be able to keep up with your monthly payments much more conveniently. This particular loan will help you keep your payments going through on time.  If you choose to go through with hire purchase car finance, you will need to pay a deposit upfront. This deposit will only be around 10%, (this may vary) but it’s still fairly affordable.

The hire purchase deal will be specifically created for you so that you are able to make your repayments on different terms. However do bear in mind that the car won’t be yours until the final payment has been made. The interest rates will be fixed so you will know how much to pay back every month.

The hire purchase type of car finance is certainly one of the simplest car finance plans out there in the UK today. You will get a flexible repayment term (which could be up to five years), giving you the time to pay back your monthly repayments in whichever way you choose. Once you have paid off half the car, you may have the option to return the vehicle without having to make any additional payments.

You could benefit from hire purchase car finance if you’re in need of a new car without having to spend a lump sum at once. Perhaps you want a new car and you currently have a poor credit rating. Choosing to go for this type of car finance deal will allow you to be more flexible with your choices as well as putting you in the driver’s seat. Literally.