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What is Hire Purchase (HP) Finance?

Drive away with more money in your pocket. Learn about the benefits of financing your next car on a Personal Contract Purchase (PCP) agreement. Check out this handy guide to find out everything you need to know about PCP agreements and how they work.

How does HP finance work?

Are you someone who wants to own your car? Hire Purchase is a popular way to finance a used car, where you pay a fixed monthly payment. This type of credit gives you the option to buy your leased car at the end of your agreement and pay off the remaining balance over 1 to 5 years.

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What could make HP a potential option for you?

  • You want own a car at the end of your finance agreement w
  • You can afford to pay higher monthly payments than a PCP agreement
  • You want to spread the cost without a large final payment at the end of the agreement
Finance at Carverse Used Car Supermarket, Knebworth, Hertfordshire

What happens at the end of a HP finance agreement

When all monthly payments and the Option to Purchase fee have been made, you'll become the legal owner of the car. Option to Purchase fee should be included in the contract when you take out the Hire Purchase agreement.

Finance at Carverse Used Car Supermarket, Knebworth, Hertfordshire


Alternative finance to HP

If you think Hire Purchase is not for you and you prefer to change your car every few years, Personal Contract Purchase (PCP) may be the option for you. You pay low monthly instalments and have 3 options at the end of your agreement: return your car, renew your agreement or pay a balloon payment to own the car.


Learn more about Personal Contract Purchase (PCP)



Hire Purchase FAQs

What are the advantages of HP?

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​What are the advantages of HP?

  • ​You’ll be able to drive away a car that you may not have managed to buy outright.
  • Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
  • Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the car.


What should you consider when opting for HP?

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​ What should you consider when opting for HP?

  • ​Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the car.
  • You won’t be able to sell the car without settling the finance.
  • You won’t own the car until you have made all of your repayments.
  • You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.


​Can I settle my HP agreement early?

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Can I settle my HP agreement early?

The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.

For a Hire Purchase agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the car early.