HP is 90% of the time always more expensive than Personal Loan.

If you have excellent credit rating, the bank will give you the best rate for personal loan. That will be around 6.9% - 9.9% APR. With personal loan, you can buy anything from the car to kitchen roll if you have a few quid spare.

But with HP, you can only use the loan to purchase the car and nothing else and the best APR for a HP is around 11.9% - 13.9% APR.

I think you should shop around and use some car finance calculator online to find the best deal.

Maxsteam, your information is incorrect (provided that we are talking about a regulated finance agreement). The rules for early settlement of all regulated loans and that includes Hire Purchase and Personal Loans are exaclty the same, both are covered by The Consumer Credit (Early Settlement) Regulations 2004:

If any rebate is due, your lender will apply a mathematical formula which is set out in the rules governing repaying loans early (the Consumer Credit (Early Settlement) Regulations 2004). The lender will apply the formula as at the settlement date and is allowed to add interest for 30 days or one calendar month after that (but only if the original length of the loan was more than one year).

The Finance & Leasing Association provide a full and detailed explanation that may help:

http://www.financingyourcar.org.uk/car/_uploads/docs/Earlyrepayment.pdf

On the website car finance section the following line appears:

"One senior financial watchdog has estimated that more than 80% of used vehicles are bought on hire purchase (HP), arranged through a dealer. They often end up paying £1,000 or more than the cheapest alternative source of car finance"

In light of the many other posts about pricing and availability of loans right now this line may be a little mis-leading - the cheapest available loan rate is easily accessible data (at any given stage), but information on HP rates charged is notoriously hard to establish. The quote may also be out of date in light of the credit crunch. Could someone advise who the senior financial watchdog was and when the quote was issued?

"the cheapest alternative source of finance" may not have been available to a prospective customer at the time of purchase; on this site there are low rates available, but they are subject to underwriting; sadly the lowest price offered is not available to all. Personal loan rates have gone up dramatically over the last 2 years (Delfaqto research), whilst acceptance levels have fallen and with increased use of risk based pricing HP may be a more attractive option that the quote suggests. HP through a motor retailer remains both available and typically is competitvely priced, it also offers a great deal more consumer protection than a personal loan. Customers should shop around as the article suggests and the motor retaielr should be part of the shopping list.