Hire Purchase (HP) Car Finance

Hire Purchase (HP) remains a popular choice for consumers looking to finance a vehicle

Despite the major rise of Personal Contract Purchase (PCP) over recent years, Hire Purchase (HP) remains a popular choice for consumers looking to finance a vehicle. HP’s straightforward scheme makes it easy for consumers to digest their finance deals. 

The first step a consumer must take towards securing an HP agreement is to put down a deposit, which in most cases, will be between 5 to 15%. 

It will also be decided on how long the term of the deal will last - this can vary, but many consumers opt for between two to five years, meaning they will have to pay a fixed monthly rate throughout the process.

Do you have a car with finance? We could help you get into a better finance deal today. To discover your options, sign up to Car Credible below.

Check your deal now

To put it simply, that fixed monthly rate, including an interest rate of around 7% flat annual rate or 13.9% APR, will allow the consumer to pay for the remainder of the car (minus the initial deposit) over the term, meaning that at the end of it, the car belongs to them.

Naturally, the cost of the fixed monthly payments will vary depending on the amount of deposit paid upfront, the length of the term and the credit score of the customer. Additionally, if a higher deposit has been paid, for example, 20 to 30%, then the customer will have cheaper fixed payments throughout the term.  

Can I get out of my finance deal early?

As circumstances may change or the consumer may decide on entering a different finance deal, there is some flexibility to step away from an HP throughout the term. 


However, an HP can be terminated after a minimum of 50% of the monthly payments have been made. The car must also be returned in a good condition, otherwise, the customer will incur a further charge against them so the car can be brought back up to good condition. 

The major positive of an HP is that the customer will become the owner of the car at the end of the term without having to make a balloon payment.

Another advantage is that the consumer is free to rack up as many miles per annum as they wish without having to worry about any additional payments at the end of the term.

Check your deal now

While many customers are enjoying the luxury of being able to change their vehicle every two to three years, many still recognise the value in owning their own car outright after an HP.


Is hire purchase good for credit score?

Providing you are making your monthly payments on time, having a hire purchase (HP) finance agreement could help improve your credit score. If you fail to make your payments on time, your credit score will decrease.

Can you pay off HP early?

If you have paid off at least half of your car finance agreement, you may be able to hand the car back early. If you haven't paid off half yet, you could make up the difference between what you've already paid and half of its cost.

Can I sell my hire purchase car?

You cannot sell your hire purchase car until you have made all of the monthly payments and paid off the loan on the car. That is because until you have made all of your payments, the car does not belong to you.