A Hire Purchase agreement is usually arranged through the dealer you’re buying the car from. You put down a deposit – which you can save up for or cover by part-exchanging your current car – then you pay off the rest of the outstanding balance via monthly payments over a set period of time.
The amount you pay back each month is fixed – you’ll pay the same amount every month until the contract ends. The size of your fixed monthly repayments will depend on the size of your deposit. If you pay a larger deposit, your remaining monthly debt will be smaller. But if you take a longer contract and plan to make lots of monthly payments, you may pay more in interest over the duration.
Find a balance that works for your budget and make sure you can keep up with the monthly repayments. Look out for dealers and/or manufacturers running special promotions on HP agreements. You may find they’ll help with the deposit or give 0% APR deals.
Shop around between dealers for finance rates as well as car prices. To work out which is best, compare APRs and the total cost of the loan.
In a Hire Purchase agreement, you don’t technically own the vehicle until you’ve made the final payment. You’re classed as the car’s keeper and the finance company is classed the legal owner of the car until you’ve paid the Hire Purchase loan off. As such, you’ll need to keep up with payments or it could be repossessed.
As the registered keeper of the car, you’re responsible for insurance, servicing and maintenance, but the finance company is the legal owner of the car until the final payment. For that reason, you can’t sell the car without the permission of the finance company.
Related: Buying and selling a car with outstanding finance