Buying a car using Hire Purchase (HP)
A way of buying where you pay a deposit up front, then pay off the rest of the balance – plus interest – in equal monthly instalments. The repayments are comparatively high, but don’t change until the end of the agreement. Provided you keep them up, you will know exactly how much you are paying, and for how long. The car is yours at the end of the agreement.
You are the registered keeper of the car and 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 permission of the finance company.
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.
Some dealers offer a slightly different arrangement, called Conditional Sale.
- You can buy out the remainder of the contract any time you wish.
- There’s lots of flexibility with the size of the deposit you put down.
- Buying through HP gives you some extra protection if there’s a problem with the car, as the finance company is liable, as well as the dealer.
- Monthly payments are generally higher than with other forms of finance.
- If you leave the contract early, either by paying it off or just walking away, you’ll have to pay a penalty charge, even if you’re up to date with your payments.
- If you don’t keep up with payments, the car will may be repossessed, and you’ll lose all the money you’ve paid.
- The car can’t be sold before that final payment, unless you contact the finance company and agree a termination value.