Hire Purchase Car Finance

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We could help you get car finance, even if you:

Have no deposit

Are in an IVA/DMP

Have a CCJ

Have previously been declared bankrupt

Hire Purchase car finance (HP) is one of the more simple and traditional ways of financing a vehicle. An agreed amount is paid over a time period of 12 to 60 months and in some cases, an initial deposit will be required. However no deposit car finance is available. These steps are taken instead of paying for the value of the car in one big payment.

As is the case of most other loans, interest is added to the loan amount. Therefore, it’s wise to assess your monthly income and calculate whether you will be able to afford the proposed outgoings. It should also be considered that a 10% deposit may be required in most scenarios.

Advantages and Disadvantages of Hire Purchase

Hire Purchase is a good option to consider if you are looking for bad credit car finance. Hire Purchase means you eventually own the car, which is unlike any other means of finance. In addition, having to repay a monthly amount of a loan can help increase your credit score, as well as having the option to own the car at the end of it.

Another advantage of Hire Purchase is the ability to budget your funds correctly. From the outset, you will know the total outgoing each month, including the fixed interest rates.
During the process of Hire Purchase car finance, a loan is secured against the car until the last payment has been made. Therefore, the hire company will own the car until all outstanding payments have been cleared, which can be done over a period of 12 to 60 months. The hire company also has the power to take the car away from you if any payments are missed.

When considering Hire Purchase car finance, it’s important to consider the deposit and the amount you are willing to pay. Essentially, your loan will be lower if you pay more towards a deposit.

One of the disadvantages of Hire Purchase car finance, is that essentially, you’re tied into a contract for one to five years so you have to be certain it is the right option for you. You should also consider that even though you are not paying a lump sum upfront, the monthly payments with added interest will usually amount to more than you would have paid for the car outright.

Alternatives to Hire Purchase Car Finance

After considering all the information on Hire Purchase, there may be other avenues you want to explore. Personal Contract Purchase (PCP) is suitable for those with a good credit rating, where Hire Purchase caters for those who don’t necessarily have a good credit score. In a PCP finance arrangement, you will only borrow the amount the car will depreciate by. At the end of the contract, a balloon payment will determine whether you can own the car or not. This is optional and is only necessary if you want to own the vehicle.

Another car finance option is Leasing – Personal Contract Hire (PCH). You pay a fixed monthly amount which covers services and maintenance, providing the car does not exceed a certain mileage. The downside to this is that you will never own the car but on the other hand, the addition of including maintenance and services means the total monthly cost works out cheaper overall.


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Hire Purchase Car Finance