What is Hire Purchase (HP) finance?

Hire Purchase (HP) car finance is a way of buying a car by paying for it in monthly instalments over a fixed period. Hire Purchase splits the car’s cost across a series of monthly repayments, usually between three and five years. Most buyers opt to pay a deposit upfront – the more you pay at the start, the cheaper your monthly payments will be and the less interest you’ll pay overall.

The monthly payments for a car on HP finance will be higher than the same car on Personal Contract Purchase (PCP) but, without the balloon payment at the end, HP’s total cost will almost certainly be lower than PCP for buyers that want to own the car. That’s because you’re paying the whole cost of the car – on PCP you’re simply paying the difference between what the car is worth now and what it’ll be worth in several years’ time.

What are the benefits of buying a car on HP?

Own the car outright at the end of the agreement. This means you can continue to run it for many more years, with only running costs and depreciation to worry about. You could also sell the car once it’s paid off for its market value, using whatever money you get to put towards your next finance agreement.

No mileage limits. You can put as many miles on the car as you wish. As such, there aren’t any excess mileage charges at the end of the agreement, and no charges based on the car’s condition, either.

Choose from a wider selection of cars. PCP finance is usually only offered on cars that are new or only a few years old. If you don’t mind looking at slightly older cars, HP is the type of finance you’ll usually be offered. So, say your monthly budget is £200 per month – that might buy you a supermini on PCP or a slightly older but bigger car on HP.

Considerations when choosing HP

One potential disadvantage for HP buyers is that they’ll probably own the vehicle well beyond the manufacturer’s warranty period, meaning they’ll be responsible for any unexpected repair costs that crop up later in the car’s life. PCP buyers, however, often remain within the warranty window, isolating themselves from most unexpected repair bills.

Of course, with the higher monthly payments on HP versus PCP, you need to make sure you can afford the cost for the duration of your agreement.

Not sure about HP? Take a look at PCP car finance, which is one of the most common ways to finance a car purchase.

How does HP car finance work at Motorpoint?

• Find your perfect car – pick from a wide choice of nearly new and used cars on our website
• Personalise your HP agreement – choose the amount of deposit you want to pay and the duration of your agreement (typically three to five years), and check you’re happy with the monthly repayments
• Start your HP agreement – pay deposit and start your monthly repayments to settle the balance of your HP agreement
• Own the car – once you have made your final monthly payment you will own the car outright

Car finance guides