What is HP car finance?

Thinking about buying your next car on finance? It's worth knowing more about HP agreements. Alongside PCP, this is one of the most common ways people buy cars on finance and spread the cost of a big purchase

In this guide, we'll answer some of the key questions you might have regarding Hire Purchase car finance.

What is HP finance? 

HP stands for Hire Purchase. It's a type of car finance that lets you spread the cost of a new or used vehicle with more affordable monthly payments. You're essentially taking out a loan that's secured against the vehicle you're buying. Once you've paid off the balance, you're the legal owner of the car, and you don't have to keep on making payments.

What does Hire Purchase (HP) finance mean? 

The term 'Hire Purchase' explains some of the processes involved with an HP agreement. Until you've made your final payment, you're technically hiring the car from your lender. You will be the registered keeper during this period, but you won't be the registered owner until you pay off the balance in full.

How does HP car finance work?

The process for buying a car on finance with HP is quite simple. You can expect the following steps with most lenders:

1. Pay a deposit 💰

You put down a deposit (a percentage of the total value) for the car you want to buy, and your finance provider lends you the rest you need. In some cases, you may not need a deposit, but this depends on the lender.

2. Get the car 🚗

With the money you need, you can buy the car you want and spread the cost. In some cases, a dealership will offer its own direct HP agreement; in others, a car finance company will pay the dealership directly on your behalf. While you're the registered keeper, you'll be responsible for insurance, servicing, repairs, and anything else associated with the car or your driving.

3. Make fixed payments 📅

You'll make either monthly or weekly repayments, depending on your lender, over the period you agreed to. This amount should be fixed and clearly stated when you sign the HP car finance agreement. You'll likely be charged interest on these payments, which means you'll pay back more than you borrowed. In some cases, you may even be able to pay your HP car finance early.

4. You're the owner 🙋🏽‍♀️

Once you've made the final payment of your Hire Purchase agreement, you'll be the legal owner of the car, not just the registered keeper. You'll have the freedom to keep, sell, or exchange it.

"HP car finance offers a simple path to owning your car. The process is transparent and easy to understand - you choose your car, agree on a term and make affordable monthly payments. Knowing you'll be the owner at the end gives you full control. You don't have to worry about hidden fees or surprises along the way, making it a reliable and stress-free option."

- Craig, Head of Underwriting

Pros and cons of HP car finance

It's important to consider the positives and negatives when choosing car finance. These are the key angles for HP agreements:

Pros

• Easy to manage: HP is about as simple as it gets with car finance. You borrow what you need for the car and pay it back in fixed instalments over the agreed term.
• Spread the cost: If you can't afford to buy your new car outright, HP finance allows you to spread the cost and get the keys sooner. You won't have to make a big balloon payment like with a PCP deal, either.
• Simple path to ownership: Even if you don't legally own the car straight away, you'll be guaranteed to once you've made the final payment. It should still feel like yours until then. 
• Flexible repayment terms: Many lenders offer flexible terms so you can spread the cost over a period that suits you and your budget.

Cons

• Subject to status: As with any credit agreement, your chances of being approved are linked to your credit history, income, and other key factors. 
• Don't own the car until after the final payment: You'll only be the registered keeper of the car until you pay off the money you borrowed plus interest. If you fail to keep up with repayments, the lender could repossess your vehicle. 
• Higher monthly payments: Compared to PCP deals, the monthly payments are higher on average for cars of a similar value. However, PCP doesn't always result in you owning the car. 
• Less flexibility: If you like to change cars every few years, an HP deal might not give you the freedom to do that as easily as a PCP finance agreement.

Get a quick Hire Purchase quote today

If Hire Purchase sounds like the right option for you, come and explore our car finance options. We offer Hire Purchase car loans from £2,000 to £15,000, over 18- to 61-month terms. It's a simple process from start to finish - get a quote in minutes, choose your repayments, sign the paperwork, and you're away!

At First Response Response, we're an award-winning car finance company, rated 4.9/5 by customers on Review Centre. As five-time winners of Feefo's Platinum Trusted Service Award and Best Car Finance Provider five years in a row, we can help get you the keys to your new car.