Hire purchase (HP) car finance with AutoMoney Motor Finance

Hire Purchase, or HP car finance, is a popular way to buy a car by spreading the cost over monthly payments.

This type of finance agreement allows you to pay for a vehicle in manageable instalments, with the option to own the car outright once all the payments have been made.

At the end of the agreement, after the final payment, the car is yours. This makes it a straightforward and affordable option for many people looking to buy used cars.

With HP car finance, you can either pay a deposit upfront, or choose a zero deposit car finance option. The rest of the balance is then divided into fixed monthly payments over a set period, usually between 1 to 5 years.

However, it's important to remember that if you fail to make your monthly payments, the lender can repossess the car, as it serves as security for the loan. You won’t own the car until the last payment is made.

How does hire purchase car finance work?

HP car finance is a straightforward way to finance a car. The process is clear, but all applications are subject to affordability and eligibility checks, ensuring responsible lending. If you already have a car in mind, you can sometimes complete your finance application on the same day.

Here’s a quick overview of how it works:

Make your application

You can make your finance application directly through a car finance provider (lender). Or you can use a car finance broker.

A broker can help you find a suitable lender, having spoken to you about how much you want to borrow and your financial circumstances. They can make an application on your behalf and help you secure an agreement, taking on a lot of the research work for you and helping you find the best possible deal from a wide range of lenders.

Once your application is accepted, the lender will offer you a loan amount. Sometimes, this may be less than you asked for if the lender thinks you might struggle to pay it back.

You will also be told what the APR (Annual Percentage Rate) is. This is the cost of borrowing over a year and helps you compare deals.

To learn more about applying for car finance, you can read our guide How to apply for finance on a car.

Choose your car

Most HP car finance providers work with a network of trusted car dealerships. Some lenders may encourage you to explore their list of approved dealers to find cars that interest you.

If you’ve already found a car you want to buy, it’s a good idea to ask the lender if they can work with that dealership. Finance providers have specific requirements for dealerships to ensure their customers are treated fairly.

The agreement

Once you’ve decided which car you want to buy and you have submitted an application, your finance provider will send you all the necessary documents to sign. This will include the terms of the agreement, which should clearly outline all the financial details, fees, and your rights and obligations throughout the agreement.

Make sure you fully understand all the terms, and if you have any questions, don’t hesitate to speak to the finance provider directly.

Deposits

With HP car finance you will usually need to pay a deposit upfront, typically around 10% of the car’s price.

The larger the deposit, the lower your monthly payments will be, because there will be less of the car’s value to pay off. However, if you can't afford to pay a deposit, some lenders, like AutoMoney Motor Finance, can offer zero deposit car finance. It’s important to check upfront whether a deposit is needed.

Monthly payments

Once you have signed your finance agreement the total amount payable will be split into fixed monthly payments. These payments are spread over an agreed period, usually between 1 and 5 years.

Some finance providers allow customers to make overpayments, which can help you save on the interest you are charged, compared to sticking to the regular monthly payments for the full term.

However, before making any overpayments, check with your finance provider if there are any extra charges for paying off the loan early. Also, be aware that missing payments could negatively impact your credit score and result in extra charges.

Final payment and ownership

Once all the monthly payments have been made, including the ‘option to purchase fee’ (usually included within the final payment), the car is legally yours.

An ‘option to purchase’ fee is a standard fee charged at the end of an HP car finance agreement. It covers changing the legal ownership of the car from the lender’s name into your name.

There’s no large “balloon payment” like some other finance options, such as Personal Contract Purchase (PCP) (a much larger cost compared to the ‘option to purchase’ fee on an HP car finance agreement).

Benefits of HP car finance

One of the great things about HP car finance is that your monthly payments remain the same throughout the entire agreement. This makes budgeting much easier, as you’ll know exactly how much you need to pay each month.

Ownership of the car

Once you’ve completed all your payments (including the ‘option to purchase’ fee), the car is legally yours. This makes it an excellent option for those who want to keep their vehicle once the agreement has come to an end.

However, until all payments are made, the car belongs to the lender. Failing to keep up with payments may result in the car being repossessed.

Flexible loan terms

HP car finance allows you to choose a repayment term that fits your needs, typically ranging from 1 to 5 years.

Some lenders may even offer extended terms of up to 7 years, which can help lower your monthly payments. This can make financing a higher-priced vehicle more affordable, especially if you have a specific budget in mind.

Keep in mind, though, that borrowing over a longer term may increase the overall cost of the car, as you will pay more interest the longer you borrow, even if the monthly payment is lower.

HP car finance on used cars

HP car finance can be used to buy second hand/used cars. This gives you access to a more affordable way to buy a car. In many cases, buying a used car is cheaper than buying a brand new car.

If the cost of the car is lower, then the amount you need to borrow to buy it will be less and the monthly payments cheaper.

By choosing HP car finance for a used car, you might find there are more cars within your budget. Additionally, used cars are often immediately available, while new cars may have manufacturer timelines or delays.

How to find a lender you can trust

Car finance lenders are required to be clear and fair, when explaining the terms of their lending and the costs involved with borrowing from them.

An organisation called the Finance and Leasing Association (FLA) sets rules that require the lenders they work with to treat you fairly when lending money and to meet customer service standards.

When looking for a car finance lender you can trust, it is a good idea to check whether they are a member of the FLA.

HP car finance with AutoMoney

At AutoMoney Motor Finance, we specialise in HP car finance for many different customers. We understand that everyone’s situation is different, and we take your circumstances into account.

We are a member of the Finance and Leasing Association, so we follow their rules to treat our customers fairly.

If you've been refused car finance elsewhere, we may still be able to lend you the money you need.

Here’s how we can help you throughout the process:

• Personal support: Our friendly sales team are here to help you every step of the way. We know that applying for car finance can be confusing, so we make sure all of our customers receive the high quality service they deserve.
• Trusted car dealers: We work with a network of trusted car dealers across the UK. All of our dealers meet strict standards, so you can be confident that you're buying from a reputable company.
• Zero deposit car finance options: We offer finance options that can allow you to finance a car without paying a deposit upfront.
• Same day funding: With our same-day funding facility, you could drive away in your new car on the same day you apply for finance with us.
• Used car financing: AutoMoney specialise in financing used cars, helping you find affordable options that suit your needs. We have the expertise to help you get the best deal on a second hand vehicle.
• Clear information: We are committed to giving you all the information you need about your finance agreement. Our team will help you understand the terms, so you know exactly what to expect.
• Ongoing support: We value our customers and are committed to providing help throughout your agreement. Our customer service team is always on hand to assist you at any point during your finance term.

Not sure if HP car finance is right for you?

There are several car financing options available, and it can be challenging to know which one to choose. You might consider options like PCP, PCH, leasing, personal loans, or even saving for a car to buy it outright, to avoid being tied to a finance agreement. The best financing option for you will depend on your individual circumstances and financial situation.

HP car finance can be a flexible choice for financing a used car, but it’s essential to do your research to ensure you select the best option for your needs. If you’d like to learn more about PCP finance options, check out our guide, Buying a car on finance: HP versus PCP, to gain a better understanding of the benefits of each option.

Apply for HP car finance

If you think HP car finance is the best option for you, AutoMoney Motor Finance are able to offer car finance on a wide range of vehicles nationwide.

To see if we can help you, call our friendly team on the free phone number above, or click through to apply for HP car finance with us.

Representative example

You could borrow £10,000 over 60 months with an initial payment of £490.66 (including £199 Admin Fee) followed by 58 monthly payments of £291.66 with a final payment of £490.66 (including optional £199 Option to Purchase Fee).

Total amount repayable will be £17,897.60.

29.3% APR, annual interest rate (fixed) 24.7%.

This example uses the representative APR. This is the rate at least 51% of customers are expected to get.

Lending is subject to status and additional affordability checks. Rates quoted are subject to change and will depend on lending amount and personal circumstances.

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