Hire Purchase
(HP) Car Finance
Spread the cost of a car across fixed monthly payments, with ownership passing to you once the agreement is complete. We search a panel of lenders for options that may suit your circumstances.
Fixed monthly payments, no mileage limits.
The car is yours once the agreement is complete.
Soft search · No impact on your credit score
What is Hire Purchase car finance?
Hire Purchase is a car finance agreement where you pay an optional deposit, then fixed monthly payments over an agreed term. The finance is secured against the car, so the lender remains the legal owner until you make the final payment and pay the option to purchase fee. The car is then yours.
Because you are financing the full value of the car, monthly payments are usually higher than they would be on PCP. In return there is no large optional final payment to plan for, and no mileage limit to stay within. Conditional sale agreements work in a very similar way. See the finance glossary
Fixed monthly payments
Your payments are agreed at the start and stay the same across the term, so the cost is predictable from the first month to the last.
Secured against the car
The agreement is secured on the vehicle itself. That is why the finance company remains the legal owner while the agreement is running.
Ownership at the end
Once the final payment and the option to purchase fee are made, ownership transfers to you and the car is yours to keep, sell or part-exchange.
What makes up a Hire Purchase payment?
Five things decide what you pay each month. Knowing how they interact makes it easier to work out what fits your budget before you apply.
Vehicle price
The agreed price of the car. Take off any deposit and what is left is the amount you finance.
Deposit
Optional on many agreements. Putting more down reduces the amount financed, which lowers the monthly payment.
Interest, shown as APR
APR expresses the yearly cost of borrowing. It is built into your monthly payment rather than charged separately.
Agreement term
The number of months you repay over. A longer term lowers the monthly payment but raises the total you pay.
Option to purchase fee
A final fee at the end of the agreement. Paying it transfers ownership of the car to you. The amount is set out in your agreement.
Who owns the car on Hire Purchase?
During a Hire Purchase agreement the finance company is the legal owner of the car. You are the registered keeper, which means the V5C is in your name, but ownership only transfers once you have made the final payment and paid the option to purchase fee.
Registered keeper and legal owner are not the same thing, which is what catches people out. Because the agreement is secured against the car, lenders usually require fully comprehensive insurance and their permission before you sell or modify it. Your agreement sets out the exact terms.
Ownership at a glance
Estimate your Hire Purchase payments
Move the sliders to see an illustrative monthly payment on Hire Purchase. It is an estimate only. Your real rate depends on your circumstances and a soft eligibility check.
- Example APR
- 9.9% rep.
- Amount borrowed
- £12,000
- Optional final payment
- £0
- Option to purchase fee
- Set in your agreement
- Total cost of credit
- £2,581
- Total amount payable
- £14,581
Soft search · No impact on your credit score
Is Hire Purchase right for you?
There is no single best type of car finance. It comes down to how long you want to keep the car, how much you drive, and what you want to happen at the end of the agreement.
Your answers
General information, not advice or a recommendation. It does not affect what you may be eligible for. Nothing is submitted or stored.
Hire Purchase may suit you if
Another option may be worth comparing if
Hire Purchase advantages and considerations.
Ownership
The car becomes yours once the final payment and the option to purchase fee are made.
The finance company is the legal owner for the whole of the term.
Monthly cost
No large optional final payment waiting for you at the end.
Monthly payments are higher than PCP on a like for like agreement.
Mileage
No mileage limit to stay within, and no excess mileage charge.
No guaranteed future value, so what the car is worth later sits with you.
During the term
Payments are fixed from the first month through to the last.
You need the finance company's permission to sell or modify the car.
Hire Purchase vs PCP at a glance
PCP is the option most people weigh Hire Purchase against. Conditional sale works in a very similar way to HP, while a personal loan or leasing puts you in a different position again.
| Ownership route HP Hire Purchase | Flexible route PCP Personal Contract Purchase | |
|---|---|---|
| Ownership at the end | Yours after the final payment and the option to purchase fee | Only if you pay the optional final payment |
| Monthly payments | Higher. You finance the full value of the car | Lower. You finance the expected depreciation |
| Deposit | Optional on many agreements | Often required |
| Final payment | Option to purchase fee only | Large optional final payment |
| Mileage limits | None | Agreed limit, with charges if you exceed it |
| At the end you can | Keep the car. It is yours | Keep it, return it or part-exchange it |
How a Hire Purchase agreement ends.
Most agreements simply run their course, but they do not have to. There are three ways a Hire Purchase agreement can end, and the one you choose changes what you pay and what happens to the car.
If you are struggling with payments, speak to your finance provider as early as you can. Acting early usually leaves more options open.
Running to the end
You make every scheduled payment across the term, then the option to purchase fee. Ownership transfers to you and the agreement closes. This is the route most Hire Purchase agreements take, and it needs no action beyond keeping up the payments.
- What you pay
- Every scheduled payment, then the option to purchase fee
- The car
- Becomes yours once the final payment clears
Settling early
Regulated agreements can usually be settled early. The amount depends on your agreement and the settlement figure your finance company provides, not the broker. Ask them for that figure in writing before you decide, because it can differ from the balance you expect.
- What you pay
- A settlement figure quoted by your finance company
- The car
- Yours once that settlement figure is paid in full
Voluntary termination
Regulated agreements carry a right to voluntary termination under the Consumer Credit Act 1974, once you have paid at least half the total amount payable. The car needs to be in reasonable condition. Your own agreement sets out exactly how it applies to you.
- What you pay
- Up to half the total amount payable, plus arrears and any damage beyond fair wear and tear
- The car
- Handed back to the finance company
Voluntary termination rights come from the Consumer Credit Act 1974. MoneyHelper publishes free impartial guidance on ending a car finance agreement early.
Hire Purchase and your credit history.
Because Hire Purchase is secured against the car, some lenders consider a wider range of credit circumstances than they would for unsecured borrowing.
A lender looks at your credit history, what you can afford now, how steady your income is, any deposit you put down, and the car itself, because the finance is secured against it.
Your credit history is one part of that picture rather than the whole of it, which is why two people with the same score can get different answers.
Find your situation
What each one means, and how long it stays on your file.
Most markers drop off six years after the date they were recorded. One exception: a CCJ paid in full within one calendar month of judgment is removed from the register instead of staying the full six years.
All finance is subject to status, affordability and the lender's assessment.
How CarFinanced arranges Hire Purchase.
Check your eligibility
You give us a few details about yourself and the finance you are looking for. This initial eligibility check is a soft search, so it leaves no impact on your credit score at that stage.
We search our panel of lenders
We look to find the best rate from our panel of lenders and offer you the best deal you are eligible for. We do not give advice or a recommendation, so the decision stays with you.
Complete your agreement
All finance is subject to status and income, and applicants must be 18 or over. Depending on the supply route of your vehicle, a separate administration fee of £299 may apply.
Soft search · No impact on your credit score
Why drivers use CarFinanced for Hire Purchase.
FCA regulated
CarFinanced Ltd is authorised and regulated by the Financial Conduct Authority under firm reference number 1014460. Our authorisation can be checked on the public FCA register.
A broker, not a lender
We do not lend. We search our panel of lenders and offer you the best deal you are eligible for. The lender pays us a commission, a fixed fee or a fixed percentage of the amount borrowed, which does not influence your rate.
A soft eligibility check
The initial eligibility check is a soft search, so it leaves no impact on your credit score at that stage. You can see what may be available to you before taking anything further.
All credit scores considered
Applications are considered across all credit scores. Every application is subject to status and income and applicants must be 18 or over, so applying is never a guarantee of finance.
Making car finance simple for 10,000+ customers
“I’ve bought many cars using finance companies in the past but none have been as good as CarFinanced. Special thanks for overseeing the process and ensuring I got the best deal on my new car.”
“Quick, simple process. My account manager was great throughout. Very helpful, professional and quick with responses to any questions I had.”
“CarFinanced explained the finance agreement in detail, which gave us confidence to move forward with the car.”
“Thank you CarFinanced. I applied and picked up my car within a few hours. Outstanding service from all the team.”
“Excellent service from start to finish. Everything was explained clearly and my questions were answered efficiently.”
“Excellent service. The team arranged the finance quickly and remained very responsive throughout the process.”
“My account manager was absolutely first class. Patient, knowledgeable and nothing was too much trouble.”
“Fantastic service. Very professional and polite, making the whole experience straightforward from beginning to end.”
Hire Purchase is a car finance agreement where you pay an optional deposit, then fixed monthly payments across an agreed term. The finance is secured against the car, so the finance company remains the legal owner until the final payment and the option to purchase fee are made.
The finance company is the legal owner while the agreement runs, because the finance is secured against the vehicle. You are the registered keeper and you drive it as your own. Ownership transfers to you once the final payment and the option to purchase fee clear.
Neither is better in general terms. Hire Purchase has higher monthly payments but leads to ownership, with no large final payment and no mileage limit. PCP has lower monthly payments, a mileage limit, and an optional final payment if you decide you want to keep the car.
Compare Hire Purchase and PCP →A deposit is optional on Hire Purchase. Putting one down reduces the amount you finance, which lowers both the monthly payment and the total amount payable. Agreements without a deposit may be available subject to status, and the monthly payment will be higher as a result.
No deposit car finance →Previous credit problems do not automatically rule out car finance. Lenders may consider your wider circumstances, affordability and current financial position. CarFinanced considers applications across all credit scores. All finance is subject to status and income, and applicants must be 18 or over.
Bad credit car finance →Regulated agreements can usually be settled early. The amount depends on your agreement and the settlement figure your finance company provides, not the broker. Ask them for that figure in writing before you decide, because it can differ from the balance you were expecting.
How settlement figures work →Regulated agreements carry a right to voluntary termination under the Consumer Credit Act 1974, once you have paid at least half the total amount payable. The car is returned in reasonable condition. Your own agreement sets out exactly how the right applies to you.
The 50% rule explained →Hire Purchase agreements do not set a mileage limit, because you finance the full value of the car and own it at the end. Mileage still affects what the car is worth if you come to sell it, but it does not trigger an excess charge.
You make the final monthly payment and the option to purchase fee, and ownership transfers to you. The amount of that fee is set out in your agreement. There is no balloon payment to plan for, and nothing to hand back at the end.
The initial CarFinanced eligibility check uses a soft search, so it does not affect your credit score at that stage. A lender may carry out further checks later if you choose to proceed. Finance is subject to status and income, and applicants must be 18 or over.
Ready to see your Hire Purchase options?
Start with a soft eligibility check and see what may be available based on your circumstances.
