Hire Purchase (HP) is a type of car finance. It is like Conditional Sale car finance but is slightly different.
Hire Purchase (HP) is a type of car finance. It is like Conditional Sale car finance but is slightly different.Â
You might be wondering what is Hire Purchase? Well Hire Purchase, which can also be referred to as HP or HP car finance, is a type of car finance that can be used to buy a new or used car.
When signing a Hire Purchase agreement, you may be required to pay an initial deposit. This is followed by fixed monthly payments for the duration of the agreement. At the end of the agreement there is a nominal fee known as an ‘option to purchase fee’. Once all of the repayments and this fee has been paid, you will then own the vehicle.
You might be wondering what is Hire Purchase? Well Hire Purchase, which can also be referred to as HP or HP car finance, is a type of car finance that can be used to buy a new or used car.
When signing a Hire Purchase agreement, you may be required to pay an initial deposit. This is followed by fixed monthly payments for the duration of the agreement. At the end of the agreement there is a nominal fee known as an ‘option to purchase fee’. Once all of the repayments and this fee has been paid, you will then own the vehicle.
Hire Purchase (HP) is a type of loan that allows you to borrow the total value of the car, minus any deposit. You will then repay the loan, including any fixed rate interest charges from the lender. These fixed monthly instalments are usually between 1 to 5 years. Some agreements from lenders are over 5 years.
Hire Purchase (HP) is a type of loan that allows you to borrow the total value of the car, minus any deposit. You will then repay the loan, including any fixed rate interest charges from the lender. These fixed monthly instalments are usually between 1 to 5 years. Some agreements from lenders are over 5 years.
If you want to own the car yourself at the end of the agreement, then you will be asked to pay an ‘option to purchase’ fee. This is usually a nominal fee, but the amount should be clearly stated within the contract. There is also no annual mileage limit with Hire Purchase, so that is one less thing to think about.
The more you pay as a deposit the cheaper your monthly repayments are likely to be throughout your agreement, so really consider how much you want to put down as a deposit.
HP car finance might not be the right sort of car finance for you, and it’s always worth looking at your options and the different types of car finance out there before making a decision.
If you want to own the car yourself at the end of the agreement, then you will be asked to pay an ‘option to purchase’ fee. This is usually a nominal fee, but the amount should be clearly stated within the contract. There is also no annual mileage limit with Hire Purchase, so that is one less thing to think about.
The more you pay as a deposit the cheaper your monthly repayments are likely to be throughout your agreement, so really consider how much you want to put down as a deposit.
HP car finance might not be the right sort of car finance for you, and it’s always worth looking at your options and the different types of car finance out there before making a decision.
It can be difficult deciding what car to buy, but let’s say that you’re looking for a car priced at £8,000, with a fair credit score. Your Hire Purchase agreement will vary depending on personal circumstances, but below is an example of what it could look like.
Illustrative example*:
Deposit: £1,000
Borrow: £7,000
APR: 13.9%
Agreement length: 60 months (5 years)
Monthly payments: £159.63
Total cost of credit: £2,578.80
Option to purchase: £1
Total amount payable (including deposit and option to purchase fee): £10,578.80
*Correct as of 10 August 2023
Depending on how much deposit you wish to pay, as well as the amount you want to borrow your HP agreement will look different to the above. When taking out Hire Purchase finance always ask to see the breakdown of the agreement which should list out all costs like the above. That way you can be really sure what you are paying, and why the monthly payments are the amount they are.
It can be difficult deciding what car to buy, but let’s say that you’re looking for a car priced at £8,000, with a fair credit score. Your Hire Purchase agreement will vary depending on personal circumstances, but below is an example of what it could look like.
Illustrative example*:
Deposit: £1,000
Borrow: £7,000
APR: 13.9%
Agreement length: 60 months (5 years)
Monthly payments: £159.63
Total cost of credit: £2,578.80
Option to purchase: £1
Total amount payable (including deposit and option to purchase fee): £10,578.80
*Correct as of 10 August 2023
Depending on how much deposit you wish to pay, as well as the amount you want to borrow your HP agreement will look different to the above. When taking out Hire Purchase finance always ask to see the breakdown of the agreement which should list out all costs like the above. That way you can be really sure what you are paying, and why the monthly payments are the amount they are.
At Moneybarn, we offer a type of vehicle finance that is very similar to Hire Purchase called, Conditional Sale. The main differences between Hire Purchase and Conditional Sale, is that there is no option to purchase fee with a Conditional Sale agreement. Once all repayments have been made you become the owner of the car.
Depending on personal circumstances, you might not need to pay a deposit to get vehicle finance with us. Please note this depends on factors such as your affordability and credit score. Some of our agreements may require a deposit.
If you think Conditional Sale might appeal to you more than Hire Purchase, then use our car finance calculator to see what a Conditional Sale agreement could look like for you and your specific circumstances.
You may also consider leasing a car, this is a different type of finance all together.
The best way to understand if HP is right for you, is by weighing up the pros and cons of this sort of finance. Some examples are shown in the below table:
At Moneybarn, we offer a type of vehicle finance that is very similar to Hire Purchase called, Conditional Sale. The main differences between Hire Purchase and Conditional Sale, is that there is no option to purchase fee with a Conditional Sale agreement. Once all repayments have been made you become the owner of the car.
Depending on personal circumstances, you might not need to pay a deposit to get vehicle finance with us. Please note this depends on factors such as your affordability and credit score. Some of our agreements may require a deposit.
If you think Conditional Sale might appeal to you more than Hire Purchase, then use our car finance calculator to see what a Conditional Sale agreement could look like for you and your specific circumstances.
You may also consider leasing a car, this is a different type of finance all together.
The best way to understand if HP is right for you, is by weighing up the pros and cons of this sort of finance. Some examples are shown in the below table:
Our vehicle finance, as explained above, is Conditional Sale. Which means we don’t always require a deposit, and never require an option to purchase fee as you will own the car at the end of your agreement.
If you’re on the fence about what type of finance you might want to take out, then make sure you take your time to understand more about our application process, as well as, what exactly a Conditional Sale agreement is. Here’s what you would need if you wanted to apply for CS finance with us:
If you have a car in mind, then make sure it fits within our lending criteria. But if you don’t, no need to worry! We can help guide you through the process.
Our vehicle finance, as explained above, is Conditional Sale. Which means we don’t always require a deposit, and never require an option to purchase fee as you will own the car at the end of your agreement.
If you’re on the fence about what type of finance you might want to take out, then make sure you take your time to understand more about our application process,as well as, what exactly a Conditional Sale agreement is. Here’s what you would need if you wanted to apply for CS finance with us:
If you have a car in mind, then make sure it fits within our lending criteria. But if you don’t, no need to worry! We can help guide you through the process.
When you finance a car through a Hire Purchase you have the opportunity to buy the car at the end for a small fee, known as the option to purchase fee. With leasing a car, you will still make monthly payments but not be able to buy the car at the end of your contract. Think of it as renting a car for a specific amount of time.
Depending on your circumstances, leasing a car might be a better option for you if you don’t want to own the car at the end of the agreement. Leasing agreements can have lower monthly payments compared to Hire Purchase (HP), but have conditions such as mileage limits.
If you go for HP finance then there will be an option to purchase fee at the end of your agreement. If you have PCP car finance there are more options for you to decide from at the end of the agreement:
PCP agreements may have cheaper monthly payments when comparing finance for the same vehicle price. PCP agreements may be suitable if you are looking to change your car regularly.
No, you cannot modify a car on HP finance. If you really want to then get in touch with your finance provider and ask if you are able to. Without their prior agreement you must not modify the car.
No, you cannot sell a car on HP finance as you are not the registered owner. Only when you own the car outright at the end of your agreement, can you think about selling the car. If you are still making your monthly payments, then you must not sell the car.
Yes, however, you will need to contact your finance provider to ask them what your early settlement figure would be, and how this should be paid.
Yes. If you want to return your car early you will have to pay at least half the total amount payable as set out in the agreement. This amount can be found in your contract.
If you’re still not sure about giving your car back, call your HP finance lender and they’ll be able to discuss this with you.
When you finance a car through a Hire Purchase you have the opportunity to buy the car at the end for a small fee, known as the option to purchase fee. With leasing a car, you will still make monthly payments but not be able to buy the car at the end of your contract. Think of it as renting a car for a specific amount of time.
Depending on your circumstances, leasing a car might be a better option for you if you don’t want to own the car at the end of the agreement. Leasing agreements can have lower monthly payments compared to Hire Purchase (HP), but have conditions such as mileage limits.
If you go for HP finance then there will be an option to purchase fee at the end of your agreement. If you have PCP car finance there are more options for you to decide from at the end of the agreement:
PCP agreements may have cheaper monthly payments when comparing finance for the same vehicle price. PCP agreements may be suitable if you are looking to change your car regularly.
No, you cannot modify a car on HP finance. If you really want to then get in touch with your finance provider and ask if you are able to. Without their prior agreement you must not modify the car.
No, you cannot sell a car on HP finance as you are not the registered owner. Only when you own the car outright at the end of your agreement, can you think about selling the car. If you are still making your monthly payments, then you must not sell the car.
Yes, however, you will need to contact your finance provider to ask them what your early settlement figure would be, and how this should be paid.
Yes. If you want to return your car early you will have to pay at least half the total amount payable as set out in the agreement. This amount can be found in your contract.
If you’re still not sure about giving your car back, call your HP finance lender and they’ll be able to discuss this with you.
Conditional Sale is the type of car finance that we offer at Moneybarn, and it doesn’t always require a deposit.
Understand all the different types of car finance that could be available to you. From Hire Purchase to Leasing.
Try our car finance calculator to see what a CS finance agreement with Moneybarn could look like for you.
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
