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Hire Purchase

Secure your new wheels with a hire purchase deal

A step closer to your new, sweet ride

 

 

car finance illustration

 

What is hire purchase?

 

Hire purchase (HP) works similarly to a loan, in that you’ll make monthly payments. At the end of the agreement you will own the car outright without having to make a large additional final payment. 

With HP, the finance company has security in the form of the car, so if you don't keep up with repayments they can take it away. However, this security also means the finance company is more likely to consider an application from you if you have a poor credit rating due to missed payments or CCJs in the past.

If you’re looking to compare hire purchase deals, let MoneySuperMarket do the hard work for you. We’ll help you to find and compare deals so you can find the right car finance for you. 

Why choose hire purchase with MoneySuperMarket?

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It’s quick and easy

 

You’ll see all the HP deals you’re eligible for in one place. This includes the interest rate you’ll be charged and how much your monthly repayments will be, plus your chances of being accepted.

 

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Your credit score won’t be harmed

 

We’ll run a soft search on your finances to show you your chances of being accepted for a hire purchase deal – without it leaving a mark on your credit rating.

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Apply today

 

In some cases an unsecured personal loan can be a suitable option for your car purchase. This may work best for the purchase of used cars and those from private sellers – where dealership finance is not an option. When you use a car loan to pay you’ll own the car outright and you’ll pay back the cost in monthly repayments to your loan provider. There are no extra fees and charges to pay on top of the loan.

How does a hire purchase agreement work?

If you want to go down the HP route for your new wheels it’s important to understand how the contract will work. Here’s a step-by-step example of how a hire purchase agreement works:

  • Select deal

    Once you’ve decided HP is the right financing option for you, compare HP deals through MoneySuperMarket, in partnership with Motiv

  • document icon

    Make an optional deposit

    You’ll have the option of paying a small deposit – in some cases this can be done via part exchange – to secure the car.

  • loans icon

    Pay monthly installments

    You’ll pay back the money you owe in monthly instalments. You’ll be the ‘registered keeper’, but the finance company will own the car until you’ve paid all your instalments.

  • Own the car

    At the end of the deal there is usually a small ‘option-to-purchase' fee but then you’ll be the legal owner of the vehicle.

How much does HP cost?



The total cost of an HP deal will include the regular monthly payments and any up-front deposit you choose or are required to put down.

The main factors that impact the size of the regular monthly payments are:

  • The amount you’re borrowing: A higher borrowed amount means higher monthly payments. This can be reduced by buying a less expensive car or by putting a larger deposit down
  • The term of the deal (specifically how many repayments you will be making): The longer the term, the lower the monthly payments. Typical terms are three to five years
Our car finance calculator can help you find out more.
 
 
36 Month Example

 

Car Price

£10,000

Deposit

£2,000

Representative APR

12.9%

Option to purchase fee

£10

Monthly cost £266.46
Total cost of credit £1,602.48

Source: Motiv Finance. Representative 12.9% APR

 

How to choose the best HP deal for you

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    Set your budget

    Make sure you choose an HP deal you can afford to repay each month. The more expensive the car, the larger your repayments and the more interest you’ll pay.

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    Check the terms of the deal

    Make sure the deal delivers what you need – from the amount you’re borrowing and the interest rate, to any early repayment charges.

  • money bag icon

    Compare from a range of deals

    Compare HP deals with our partner Motiv to find a deal that’s right for you. You’ll also be shown your chances of being accepted.

Can I get HP with bad credit?

As HP finance is secured on the car you buy, the lender is more likely to approve your application if you’ve missed payments or had CCJs in the past. It’s important to remember:

  • If you have a poor credit history, it is still possible to get a HP deal
  • A stronger credit score will improve your chances of being accepted for the HP deal you’re after
  • When you compare hire purchase finance through MoneySuperMarket, we’ll do a ‘soft search’ - so your credit score won’t be affected
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What are the alternatives to hire purchase?

There are a range of alternative finance options for buying a car if you decide against hire purchase. These include:

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Personal contract purchase

 

  • Put down a non-refundable deposit

  • Borrow towards some of the remaining value of car

  • Make a large final payment to keep the car or return it and take out a new PCP on a fresh car

 

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Personal contract hire

 

  • A popular way of leasing a vehicle – which is typically a more affordable option than buying a car outright

  • You’ll hire a new car for an agreed period – usually between one and four years, with monthly payments until your lease ends

  • Once your contract finishes, you’ll return the car with no option to buy

 

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Car loan

  • Take out a personal loan to cover the cost of the car

  • Choose how long you’ll need to pay off the loan – the longer the term, the more interest you’ll pay

  • You’ll own the car as soon as you’ve paid the seller the money

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Compare hire purchase with MoneySuperMarket and our partner Motiv

You can compare hire purchase deals with our partner Motiv, in a few simple steps:

  • document icon

    Tell us about yourself

    We’ll ask you a handful of simple questions about you, your finances and the deal you’re looking for

  • car icon

    Your ideal car

    If you’ve already found the car you want, you’ll need to enter those details. Not found your new wheels yet? Don’t worry, you can still compare deals with us

  • click icon

    Choose your deal

    If any of the offers shown to you match your needs, then you’ll be able to continue your application online with your chosen finance company

For HP to be an option, the car you are looking to buy will typically need to meet the following criteria:

- It must be for sale at a reputable car dealership

- It must not be too old or have done too many miles

The exact criteria here will depend on the finance company, but as a guide if the car is more than 10 years old or has done more than 100,000 miles HP is less likely to be an option and you may want to look at a personal loan / car loan

The amount you will need to borrow will be the difference between the value of the car you are looking to buy and any up-front deposit you put down. The finance company will then set your monthly instalments to cover the borrowed amount as well as the interest you are charged during the period.

If you want to change your car, any outstanding finance outstanding on your current car will need to be settled first. You have two main options:

1. Settle it yourself: You will need contact your current finance provider and ask for an “early settlement figure”. Once this is done, the car will be yours and you can either trade it in at a car dealership, or sell it privately and use the proceeds money towards your next car

2. Trade it in: Another option is to simply trade it in at a dealership and in this case the dealer will settle the finance for you. Any difference between the “early settlement figure” and the trade-in value offered by the dealer can then be used as a towards your next car. Note that if Ifthe car’s trade-in value is lower than the early settlement figure this may still be an option, but you will likely need to make up the difference yourself in cash (known as negative equity). This is called a “negative equity” situation.

With HP, once you’ve made your last payment, which may include a small option-to-purchase fee, you will become the full legal owner of the vehicle.

Unfortunately, during the term of the agreement you will not own the car and so will not be able to sell it. If you wish to sell the car you will need to settle the finance first.

If you wish to make any modifications to a car that is currently financed with HP then you’ll usually need to obtain get permission from the finance company. This is because although you may be the registered keeper of the car, the finance company will be the owner until the finance is paid off in full.

During the term of an HP agreement the car will be owned by the finance company. This usually means bailiffs cannot seize it, but the law is complicated around this so however the law is complicated on this matter and they may suggest that they can. In this scenario contact Citizen’s Advice for help and in the meantime, you may want to consider moving your vehicle to a different location where bailiffs are unable to access it , for example, a friend or family’s driveway (assuming you have permission) or a locked garage.

 

You may be able to pay off your hire purchase agreement early, but how this would work will vary depending on your lender. If your lender lets you pay off your HP deal early, you’ll repay the remaining amount borrowed – so you’ll save money on interest, but you may need to pay an early repayment charge.

To pay off your hire purchase deal early, you’ll need to ask for a settlement figure from your lender which will include the outstanding amount you have left to repay, minus any future interest not yet accrued, plus any fees the lender may charge you. Your settlement figure will be valid for 28 days – if you choose not to repay your deal within this time period, you’ll need to request a new settlement figure.

 

Car finance guides

MoneySuperMarket gives you lots of clever ways to save a lot, by doing very little.

  • Take control of your credit score by checking and improving it for free with Credit Monitor
  • Never overpay again with Energy Monitor, our energy monitoring service
  • Over 50 ways to Get Money Calm

So how do we make our money? In a nutshell, when you use us to buy a product, we get a reward from the company you’re buying from.

But you might have other questions. Do we provide access to all the companies operating in a given market? Do we have commercial relationships or ownership ties that might make us feature one company above another?

We commit to providing you with clear and informative answers on all points such as this, so we have gathered the relevant information on this page.