Hire Purchase (HP) is a finance credit agreement designed to get you behind the wheel by spreading the cost of your chosen vehicle across a fixed period of time through monthly payments. Once your contractual agreement term ends, you own the car.
A Hire Purchase deal is often arranged through the dealer that you buy the car from and would begin with an initial down payment or deposit. You may have the option to pay your deposit through cash or through a part-exchange and trade-in scheme depending on the terms of your dealer. The amount of deposit you pay will determine your monthly payment rate, that is, the higher your deposit, the lower your monthly payment. Your contract will usually last sometime between 12 and 60 months but can be altered to suit your needs. A longer contract will mean lower monthly payments and vice versa.
|Car price||Agreement term||Your monthly car loan payment|
|12 months||£20,000/12 = £1,667 (plus any interest)|
|60 months (5 years)||£20,000/60 = £333 (plus any interest)|
In short, under a Hire Purchase plan (HP) you choose your car, how much deposit to put down, the term of the contract and own the car once you have paid your final instalment.
A HP finance deal could be the best deal for you if: