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 contract term and, once all the payments have been made, you own the car. Should you default on your monthly payments the supplier has the right to reposess the car.
You specify
- Term - the term of the HP contract 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.
You simply make the monthly payments for the duration of the term and the car is yours to keep
The Benefits
Hire purchase is a simple way to buy a car, spreading the cost over a fixed term. You can select a term that ensures the payments match your budget and 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.