Hire Purchase
Hire Purchase (HP) is one of the most straightforward ways to finance a car. You pay a deposit, make fixed monthly payments, and own the vehicle outright at the end.
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Hire Purchase
Hire Purchase (HP) is one of the most straightforward ways to finance a car. You pay a deposit, make fixed monthly payments, and own the vehicle outright at the end.
What is Hire Purchase?
An HP agreement lets you spread the cost of a car over a fixed period. You put down a deposit - typically around 10% of the vehicle's value - and repay the remainder in equal monthly instalments over a term that usually runs between 12 and 60 months. Technically, the lender owns the car during the agreement. Once you've made every payment
and settled a small Option to Purchase fee at the end, ownership transfers to you. Until that point, you can't sell or modify the vehicle without the lender's consent. Hire purchase is available on New and Used cars, including electric vehicles (EVs), and can be arranged through your local dealership or directly with a finance provider.
How Hire Purchase Works with Vertu
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Advantages of Hire Purchase
HP suits drivers who want a straightforward path to ownership without needing to save the full purchase price upfront.
- Predictable costs - fixed monthly payments make budgeting easier, and the interest rate is agreed at the start so it won't change.
- You'll own the car - unlike leasing or personal contract hire, you're working towards outright ownership from day one.
- No mileage limits - because you'll own the vehicle, there are no annual mileage caps or excess charges.
- Flexible terms - you can adjust the deposit amount and contract length to find a monthly payment that works for your budget.
Things to keep in mind about Hire Purchase
Hire purchase is a credit agreement, so it's worth understanding the full picture before you sign.
• You don't own the car during the agreement - the lender does. You can't sell it without settling the finance first.
• Missed payments have consequences - the lender can repossess the vehicle if you fall behind.
• Early settlement is possible* - you have the right to settle the agreement early and pay less interest overall, though check for any early repayment charges.
• Monthly payments can be higher than PCP - because you're repaying the full value of the car, instalments tend to be larger than on a personal contract purchase deal for the same vehicle.
*Under the Consumer Credit Act, if you've paid at least half of the total amount payable, you have the right to voluntarily terminate the hire purchase agreement and return the car as long as it's in good condition.
Other ways to finance a car
What is a balloon payment on Hire Purchase?
Hire Purchase agreements do not have a balloon payment like Personal Contract Purchase agreements do. However, 'balloon payments' in relation to Hire Purchase deals may refer to the Option to Purchase fee. This is the final amount you need to pay to own the vehicle at the end of the contract. The Option to Purchase fee in a Hire Purchase plan is much less than a balloon payment on a personal contract purchase.
Can you pay off Hire Purchase early?
Yes. According to Section 99 of the Consumer Credit Act 1974, you have the right to voluntarily terminate a Hire Purchase contract. However, you must have paid at least half of the finance amount.
You will need to request a valid settlement letter which will detail how much you have left to pay in order to exit the Hire Purchase agreement.
If you haven't already paid off half of the finance amount, you can pay a lump sum to bridge the difference.
You may also have to pay a termination fee, so it's worth bearing this in mind.
If you would like more advice on this topic, get in touch with our friendly team.
Can you modify a car on HP finance?
You will only be able to modify the vehicle once you have paid it off in full, at the end of your Hire Purchase contract. While the agreement is running you are not the legal owner of the car, so you shouldn't make any modifications to it.
Once you own the car outright, you can make the modifications you would like.
Can you sell a car on Hire Purchase?
With Hire Purchase, you aren't the legal owner of the car until you have made all the payments and paid the Option to Purchase fee. The lender remains the owner of the vehicle up until this point. Therefore, you must wait until you are the legal owner to
What is a Hire Purchase agreement?
Hire Purchase is a type of car finance for new and used cars. It involves paying an initial deposit alongside fixed monthly payments for an agreed length of time. At the end of the term, you can pay an Option to Purchase fee to own the vehicle outright.
Hire Purchase is a great finance option if you want to pay for your car in manageable monthly costs that are fixed. It is also ideal if you know you want to own the vehicle at the end of the agreement.
At Vertu, we offer a wide range of Hire Purchase deals across our new and used car range. Contact us to see how we can help you find your next car at a great price.
What's the difference between Hire Purchase and personal contract purchase?
With a Hire Purchase contract, you effectively pay monthly to 'hire the vehicle. You only ever own the car once you have made all the payments and have paid the Option to Purchase fee. Hire Purchase is an ideal option if you want to own the car at the end of the agreement.
With personal contract purchase (PCP), you pay monthly towards the predicted depreciation costs of the car. When the agreement comes to an end, you have three options:
- 1. Pay a balloon payment to own the car outright
- 2. Return the car to the lender
- 3. Use any equity in the car towards the deposit of your next vehicle and take out a new plan
The most common option is to exchange the car for a new one, taking out a new agreement. PCP may be a more suitable finance option if you would like to drive a new car every few years.
What's the difference between Hire Purchase and personal contract hire?
With Hire Purchase, you pay a deposit and monthly instalments to effectively 'hire' the car until you own it. Once you have made all the payments and paid an Option to Purchase fee, you will own the vehicle.
With personal contract hire, you pay monthly to effectively 'lease' the vehicle, but you must return the car at the end of the agreement. This finance type is ideal if you want to drive a new car but know you don't want to own it at the end of the contract.
Can you return a Hire Purchase car early?
Yes. Under Section 99 of the Consumer Credit Act 1974, you have a legal right known as ‘Voluntary Termination’. Provided you have paid or can make up 50% of the total finance amount, you’re able to return your Hire Purchase car.
Can you get Hire Purchase on second hand cars?
Yes. Hire Purchase is available on a large variety of both New and Used cars.