Hire Purchase (HP) is a type of car finance that’s very similar to a personal loan. The finance agreement is flexible, and it can keep costs low over the full length of the term. It’s an attractive deal because of its simplicity.
Arranging an HP finance plan to meet your budget is simple. Depending on the model of car you select, it may not even be necessary to make a deposit. Where deposits are made, they typically stand at around ten percent of the vehicle’s current value.
HP terms usually last for 12-36 months, with a repayment made every month. In effect, you are hiring the vehicle until all payments are made – hence the term Hire Purchase. Both the repayment amount and the interest rate are fixed for the whole agreement.
The security on this finance plan is the vehicle itself, so your other lines of credit stay available to make other purchases. However, this does mean that the vehicle will be repossessed if you fail to make all scheduled payments, and you are still liable for the remaining amount.
If you decide to pay off the full amount early, there is no additional charge – with a personal loan, doing this would incur a penalty.
When all payments have been made, you become the legal owner of the car. You can then:
Importantly, this can only be done when the final payment has been made. If the HP agreement is still running, you are not allowed to sell or otherwise dispose of the vehicle.
To learn more about Hire Purchase and choose a car on finance, come to one of our Eden Motors dealerships.