Hire Purchase Explained

In this article, we explain what Hire Purchase (HP) is and provide you with all the information you need to decide whether it’s the right option for you.

Hire Purchase (HP) is perfect for:

– If you want to own the car

What is Hire Purchase (HP)?

A Hire Purchase (HP) contract is the most straightforward type of car finance available. It is typically 2-5 years long, needs a deposit, and tends to have higher monthly payments. At the end of the contract, the car will be owned by you. Hire Purchase is also sometimes known as a ‘Conditional Sale’ agreement.

HP Terms Explained

Term What you need to know
Duration of agreement The total duration of your agreement in months.
First Payment The first amount you pay after taking delivery of your vehicle, usually one month after the finance agreement starts.  This is then followed by your normal monthly payments.
XX Monthly Payments of The amount you pay per month of your finance agreement. Throughout the contract, your monthly payments will pay off the total value of the car, and therefore tend to be higher than other finance contracts such as a PCP.
Final Payment The amount you pay in the last month of your finance agreement to end your contract.
On the Road Price/
Cash Price
The total amount your vehicle is worth if you were to purchase your vehicle outright.
Customer Deposit/
The total amount you put down as a deposit for your vehicle. The deposit can affect your monthly payments; the higher the deposit, the lower the monthly payments will be.
Amount of Credit The total amount you are borrowing on your finance agreement.
Total Amount Payable The total amount you will pay to purchase your vehicle on this finance agreement. It includes your deposit and all monthly payments.
Fixed Rate of Interest Rate of interest on the amount of credit per annum, fixed for the duration of the agreement.
Representative APR The Annual Percentage Rate you are being charged for your finance agreement.

Advantages of Hire Purchase

  • You own the car at the end
  • There’s no set mileage
  • The length of the contract is flexible (dependent on manufacturer)

Things to consider

  • The monthly payments tend to be higher than other forms of finance
  • You can’t sell the car until you’ve settled the finance

Can I settle my HP contract early?

Yes, but early repayment charges may apply.

You can view our latest finance offers here, or if you want to find out about other car finance options, check out our car finance guide.

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