Hire Purchase (HP) car finance

What is Hire Purchase?

Hire purchase (HP finance) is a straightforward way to buy a car through monthly payments. You pay an initial deposit, then spread the rest over fixed monthly instalments. The car acts as security until the final payment is made. Once the agreement comes to an end, you become the legal owner.

HP car finance suits you if you want clear terms and long-term ownership. It’s ideal if you don’t have the cash to buy the car outright and want to manage your budget.

At Carplus, we help you find a hire purchase agreement that fits your needs—even if your credit history isn’t perfect.

How does Hire Purchase work?

You’ll pay a deposit first, then make monthly payments towards the remaining cost over a set period—usually 2 to 5 years. The finance covers the cost of the car, minus your deposit, and comes with a fixed interest rate.
At the end of your HP contract, you’ll pay a small ‘option to purchase’ fee. Once paid, you become the legal owner of the car.

It helps you avoid one large upfront payment and makes budgeting easier with regular monthly payments. The car acts as security, so you won’t need to worry about a final balloon payment at the end.
After all payments have been made, the hire purchase agreement comes to an end, and full car ownership passes to you.

Your income, address history, employment details, and credit history will help lenders assess your application. A good credit rating increases your chances, but Carplus also works with lenders who accept applications with a poor credit score—subject to status.
Use our online finance calculator to check what your monthly repayments might look like.

Carplus helps you find a hire purchase car finance deal that suits your situation. We compare car finance options across multiple lenders, so you get the best rate for your budget.

You won’t face any mileage limits or wear and tear charges. Once the final payment is made, the car is yours to keep.

An example of how an HP agreement works

Let us take a round sum for ease of calculation and a clearer example of how Hire Purchase car finance works. So, you want to buy a car worth £11,000. You can afford to pay a 10% deposit - that is £1,000. Carplus pays the remaining £10,000 for you.

You sign a 60-month contract at 7.9% APR. So, your monthly repayments will be £191. With all the interest and rates, the total amount you end up paying will be £11,460. You pick up the car immediately and use it directly after the deal is done.

Compare HP finance with other options

Finance features:	Hire purchase (HP)	Personal contract purchase (PCP)	Personal loan
Requires initial deposit	Optional	Optional
Car is yours at the end of the agreement		Optional
Fixed monthly payments
Optional balloon (final) payment
Avoid excess mileage charge
Secured against an asset (e.g. a car)
Support with vehicle issues

What's the difference between Hire Purchase and a Loan?

Hire Purchase (HP) gives you access to the car straight away, but the finance company owns it until you make the final payment. You make fixed monthly payments and gain ownership once you’ve paid the ‘option to purchase’ fee at the end of the agreement.

With a personal loan, you borrow money from a lender and use it to buy the car outright. You become the legal owner immediately and repay the loan separately. HP links the finance to the vehicle, while a loan keeps the car and the loan contract separate.

Is HP car financing suitable for me?

A hire purchase car finance plan could suit you if you:

• Want to own the car at the end: You become the legal owner once the final payment and the ‘option to purchase’ fee have been paid.
• Prefer fixed monthly payments: The cost of your car is spread evenly across the full length of your contract, so budgeting stays simple.
• Don’t want mileage restrictions or excess charges: Unlike PCP car finance, an HP plan comes with no mileage limits or wear and tear fees.
• Plan to keep the car long-term: If you're not looking to switch cars every few years, HP gives you stability and full car ownership.
• Can keep up with the monthly payments: You’ll need to pay the full amount agreed—missed payments can affect your credit score.

At Carplus, we help you understand how HP works and whether it fits your needs. Use our finance calculator to check what you could pay each month—subject to a credit check.

Advantages & Disadvantages of HP Car Finance

Advantages:

You can get a car without paying upfront in full.
HP finance allows you to spread the cost with fixed monthly payments.

Your monthly repayments stay the same throughout.
Fixed interest rates give you predictable payments, which makes budgeting easier.

You become the legal owner after the final payment.
Once you’ve already paid the full balance and the purchase’ fee at the end, the car is yours.

You avoid mileage limits and wear-and-tear charges.
Unlike some finance options, there are no penalties based on usage.

HP can work with a less-than-perfect credit history.
Approval is subject to status, but Carplus works with lenders open to varied credit profiles.

Disadvantages:

You don’t own the car until the agreement ends.
During the contract, the finance company is the legal owner—you’re the registered keeper.

Missed payments can lead to repossession.
Falling behind affects your credit score and could result in losing the car.

You must pay a purchase’ fee at the end.
This small charge confirms full ownership once all repayments are made.

The total cost of credit is higher than buying outright.
You’ll pay more overall due to interest added over time.

You need to make sure repayments fit your income.
If your budget changes, keeping up with the monthly payments could become difficult.

Factors to consider when applying for hire purchase car finance

Before applying, think through these key factors. Each one affects your monthly payments, total cost, and the likelihood of approval.

Your credit rating matters.
A higher score can unlock better interest rates and lower repayments. If your credit history includes missed payments or defaults, don’t worry. At Carplus, we work with lenders who consider a wide range of credit profiles.

Affordability comes first.
Work out what you can comfortably repay each month. Use our car finance calculator to check your options and stay within budget. Don’t forget to include insurance, fuel, maintenance, and road tax in your running costs.

Know your alternatives.
Hire purchase leads to full ownership, but it’s not the only option. You could also consider a personal loan or Personal Contract Purchase (PCP). Ownership, flexibility, and monthly costs vary. We’ll help you decide what fits your plans and budget.

Can I get HP car finance with bad credit score?

At Carplus, we help drivers with bad credit get approved for HP car finance. A low credit score doesn’t mean a refusal. We work with specialist lenders who assess your full profile, not just your credit rating.

Hire purchase finance gives you a way to get a car and rebuild your credit score at the same time. Unlike leasing, hire purchase ends with full car ownership. As you make monthly payments, you pay off the total amount of the vehicle. Once the final payment is made and the option purchase fee is settled, the car becomes yours.

Interest rates on HP finance vary based on your credit score. If your score is low, you may pay a higher rate, as lenders need assurance the full amount will be repaid. That said, all our HP car finance agreements come with fixed interest, that means your monthly repayments stay predictable from start to finish.

It only takes a few minutes to check your options. Use our finance calculator to estimate your repayments. Fill in a short form, and we’ll send you a personalised quote. We’ll help you get HP finance with fixed monthly payments, whether you're buying a used car or need to spread cost car ownership due to your credit history.

Am I eligible for HP finance?

You can apply for HP finance if you meet a few basic checks. We make the process simple and explain every step along the way.

To get started, you’ll need:

• A monthly income of at least £1,200
• Your full name and date of birth (you must be 18 years old or over)
• A UK driving licence
• A mobile number and email address
• Your residential address (you must have lived in the UK for 12 months or more)
• Details of your employment or income source
• Confirmation of your residency status

You can apply online in minutes. We’ll review your information, confirm how much you want to borrow, and guide you through the rest. If you meet the criteria, we’ll introduce you to a limited number of lenders that match your profile.

Can I get HP with no deposit?

Yes, you can. Some lenders offer hire purchase with no deposit, depending on your credit history and financial situation. They check your income, affordability, and credit score before making a decision. If approved, you’ll start the agreement with fixed monthly payments and no upfront cost. At Carplus, we work with lenders who accept no deposit applications and help match you with a suitable finance deal.

Your rights in an HP agreement

Before you sign a hire purchase agreement, you need to understand your legal rights and what could happen if the terms are broken. Always read your contract carefully before you commit.

Is there a possibility the vehicle will be repossessed?

If you miss payments or fail to meet the terms, the finance company can repossess the car. If you’ve paid less than one-third of the total amount, the lender can take the vehicle back without going to court. If you’ve paid more than one-third, they’ll need a court order. In either case, the car cannot be removed from private property, such as your driveway, without consent.

If the car is repossessed, it’s usually sold, and the proceeds go towards your outstanding balance. If the sale doesn’t cover what you owe, you’ll still need to pay the remaining debt. That’s why it’s important to act early if you’re struggling with payments.

Is it possible to cancel the HP agreement before the final payment?

You can end your HP finance agreement before the final payment. This is known as voluntary termination. You might choose this if your financial situation changes, you no longer need the car, or you want to explore other car finance options. Under section 99 of the Consumer Credit Act 1974, you have the right to cancel the contract once you’ve repaid at least 50% of the total amount, including interest and fees.

If you haven’t yet reached 50%, you can make up the shortfall and then terminate the agreement. You won’t receive a refund for what you’ve already paid, so think carefully before ending the contract early.

Does voluntary termination affect the credit score?

Voluntary termination won’t damage your credit score as long as it’s done correctly. It will appear on your credit record, but it won’t affect future applications. In fact, it’s a better option than missing payments or defaulting. If you’re unsure about your next step, speak to us at Carplus. We’ll help you weigh up your options and guide you through a fair exit if needed.