Under a Hire Purchase agreement you usually (but not always) pay a deposit at the start of the agreement. You then pay the rest of the value of the car in instalments, over a period of between 2 and 5 years. You hire the vehicle until you make your final payment, after which you own it. Sometimes also referred to as a Lease Purchase.
HP (Hire Purchase) agreements are based on a fixed monthly cost, meaning that the APR (Annual Percentage Rate) is set before the contract begins. The finance agreement is secured against the vehicle and this provides the lender with some flexibility regarding the terms they can offer.
Hire Purchase agreements are also available with the option of a final balloon payment – this lowers monthly payments and offers greater flexibility for specialist cars, but unlike PCP the final value is not guaranteed.
The amount you wish to borrow is based on the value of the vehicle you purchase, minus any deposit you are able to provide. A deposit can be in the form of cash element or a part exchange vehicle.
