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What is Hire Purchase (HP)
Hire purchase is a form of secured loan - except rather than the loan being secured on your house, it is secured on the car you are buying. You pay regular monthly payments for the duration of the Hire Purchase on your new car’s contract term and, once all the payments have been made, you own the car.
Should you default on the monthly payments of a new car’s Hire Purchase deal the supplier has the right to repossess the car. Which is why, to ensure that you can keep up with the payments; you thoroughly research and compare your new car’s Hire Purchase deal.
- Term – the term of your new car’s HP plan is up to you although usually will be in 6 or 12 monthly increments.
- Deposit – as with any finance agreement, you can pay an initial deposit in order to reduce the amount to be financed. Most finance providers will specify a minimum and maximum deposit amount that must be paid.
How it works
As with a standard loan, the finance provider will decide upon the interest rate they are going to offer based on the term, deposit and amount to be financed amongst other factors.
Once you’ve compared a new cars Hire Purchase deals and chosen which one to go with, you simply make the monthly payments for the duration of the term and the car is yours to keep.
After comparing Hire Purchase deals and quotes you will soon discover that it is a simple way to buy a car, spreading the cost over a fixed term. This will mean that a desired car previously out of your price range will now be available.
You can select a term that ensures the payments match your budget once you’ve compared new car Hire Purchase deals, and then chosen your ideal one. The payments are fixed at the quoted rate enabling you to budget to meet the payments. At the end of the term, the car is yours to keep or sell should you wish.
A Hire Purchase deal is relatively quick as most dealers and manufacturers offer it directly, and deposits are lower than a personal loan. As you can see there are many benefits to this option, especially if you are planning on buying the vehicle and owning it for several years afterwards - as there are no payments after you have paid the final sum of money.