Hire Purchase Explained

Also referred to as HP, Hire Purchase is an agreement with a lender whereby the balance on a vehicle is paid off with regular monthly instalments. This may be preceded (though not always) by an initial deposit.

Advantages of scheme:

• Fixed, regular payments over a set period makes planning budget easier
• Free use of vehicle – there are no mileage caps
• At the end of the agreement, the vehicle is owned by you
• Interest rates often lower than on other finance schemes
• The most popular form of car finance
• Allows early settlement of agreement by requesting from the lender the outstanding amount
• Often the preferred option for people who have a poor credit history

Disadvantages:

• Total payments can be greater than on other schemes for short-period agreements
• Agreement relies on regular payments. Failure to do so could result in your vehicle being repossessed