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Hire Purchase

Compare HP finance deals

  • See deals you're pre-approved for without harming your credit score
  • Get a quote even if you haven't found a car yet
  • Searching is quick and simple

What is HP car finance?

 

Hire purchase (HP) is a popular way of financing a car purchase. Both new and used cars can be bought with HP, but they are particularly common for used cars. In 2020, 58% of used cars financed through a dealership were done using an HP deal*.

With HP, sometimes - but not always - you’ll need to pay an upfront deposit. You'll then make fixed monthly payments under the plan. At the end of the agreement you will own the car outright without having to make an additional final payment. So, you’re technically paying to hire the car until you’ve made the 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 applications from you if you’ve missed payments or had CCJs in the past.

*Source Finance & Leasing Association - https://www.fla.org.uk/research/motor-finance-key-statistics/

 

 

person driving

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. Always read any small print and be confident you understand the terms and conditions – and any potential extra fees - of the deal before you sign up.

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Deposit

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

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Monthly payments

Pay for full use of the vehicle through regular fixed monthly instalments, which will be set from the start of the agreement

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Pay on time

You’ll be the ‘registered keeper’ but the finance company will own the car - and it is at risk - until you've paid all instalments

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Own the car

At the end of the deal there is usually an ‘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
 
36 Month Example

 

60 Month Example

Car Price

£10,000

£10,000

Deposit

£2,000

£2,000

Representative APR

12.9%

12.9%

Option to purchase fee

£10

£10

Monthly cost £266.46 £178.74
Total cost of credit £1,602.48 £2,734.64

Source: Motiv Finance. Representative 12.9% APR

How to choose the best HP deals

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Shop around

Don't just take the HP deal offered at the car dealership - you may be able to find cheaper options if you shop around online

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Check your eligibility

This will protect your credit score and allow you to understand the best rates you are likely to be approved for

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Set your budget

Decide how much you want to spend per month on your HP deal. If a quote comes in below this then you can save money by reducing the term

Can I get HP with bad credit?

HP finance is secured on the car you buy, so unlike a personal loan, the lender is more likely to approve your application if you’ve missed payments or had CCJs in the past. But this doesn’t mean your credit score will be ignored entirely with HP -  dealers may look at your credit history before accepting you for a deal to make sure you can keep up with repayments.

Before applying for an HP deal, it may be a good idea to keep an eye on your credit score, as the stronger your credit rating, the more likely you’ll be accepted for an affordable HP deal, rather than one with a higher interest rate. You can use our free service to find out if you are eligible for HP with no impact on your credit score.

Representative 23.9% APR

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two people looking at phone illustration

Hire purchase advantages and disadvantages

  • Tick icon

    Advantages:

    • Once the agreement is completed, you own the car
    • Can be a good option to consider if you have a history of missed repayments or CCJs – where other options like a personal loan, are either unavailable are or more costly
    • You can often flex the term of the deal before you sign, to reduce monthly payments or the overall cost
  • cross icon

    Disadvantages:

    • Can't usually be used for private car sales
    • HP finance is secured on the car - which means it could be repossessed if you fall behind on payments
    • You won't be able to sell or modify the car during the term

Is HP the best option for you?

If you're looking for an alterantive to HP, there are other car finance options available including:

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Car loans

With a car loan - also known as a personal unsecured loan - if you're approved you'll get the cash paid into your bank account so you'll be free to shop around for your car - buying privately or through a dealer.

Car loans are not secured against the vehicle you buy and so if you fall behind on your monthly repayments the finance company will not be able to take it away. But the interest rate is likely to be higher if you don’t have a strong credit history.

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PCP

With personal contract purchase the finance company pays the dealership for the car directly. PCP deals are secured against the vehicle, so if you fall behind on repayments the car could be repossessed. At the end of the deal you’ll have the option to own the car by making a large final payment. 

Alternatively, you could either hand the car back to the finance company, or, depending on the difference between the car’s value and the size of the large final payment, you might be able to trade it in.

 

 

How to compare HP deals

You can compare HP deals using Motiv's free service by following these steps:

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Enter your personal details

 Your details are needed to check your eligibility for offers, but don’t worry there will be no impact on your credit score

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Your ideal car

If you have already found your ideal car then enter those details. But If you haven’t found your new wheels just yet don’t worry, you can still use the service 

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Choose your deal

If any of the offers 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.

 

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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.