What is Hire Purchase Car Finance

We guess you don’t know what Hire Purchase Finance is and want to find out, right?

So what is Hire Purchase for Cars?

Hire Purchase is a widely used finance option where you effectively hire a vehicle from a finance company for an agreed period of time. After the agreed period of time ends, and all payments have been made, you cease hiring the vehicle from the finance company and become the outright owner of the vehicle.

A HP agreement is a very effective and common way of paying for a new vehicle. Loans typically last between 24 and 36 months but can stretch as long as 60 Months or more to help you with affording the repayments.

How it works?

You negotiate and come to an agreement with a finance company about how much you can afford to pay up front. This is called an initial payment. Some finance companies with specify a minimum initial payment amount.

You the agree your monthly payments and how long you want the policy to run for (the term). You make the set number payments during the the policy term.

Once the end of the agreement has been reached and all payments have been settled. The finance company gives up its interest in the vehicle and you become the legal owner of the vehicle.

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Why does the lender own the vehicle?

The finance lender has a lot of money tied up in the vehicle. Keeping the ownership of the vehicle until the end of the agreement gives them more security in the event that you miss payments or don’t pay at all! In this scenario, the lender has the ability to repossess the vehicle and can reclaim some of their loss. On a more positive note, the security allows the finance company the ability to offer more attractive terms and conditions until you make your final payment.

HP finance benefits and risks

Benefits

Convenient straightforward application process

Fixed repayments and interest rates

Additional protection over a personal loan

Payments and term to meet your budget

There is no need to estimate the mileage at the outset

Rebate of future interest if you settle your agreement early

Once you make your final payment you own the vehicle

Risks

The loan is secured against the vehicle, therefore if you miss payments on the loan the vehicle may be repossessed

Access to Premium Car Brands

Hire Purchase is a straightforward route to owning a premium vehicle. It is a great way to spread the cost of your vehicle over a fixed period of time whilst staying within a set budget and knowing that you will own the vehicle at the end of the contract.

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