We at Askaprice have put together numerous guides to help you understand the different types of vehicle finance available and which would best suit your needs.

To help you, we have evaluated the pros and cons of each form of vehicle finance, as well as provided an example of each and an explanation of what type of person would suit the finance option best.

For those looking to finance a car or van, one possible option is the use of a Hire Purchase (HP).

Hire Purchase explained

A Hire Purchase, or HP for short, is an easy way for someone to finance a new car or van. This type of financing simply involves customers paying a deposit for their chosen model, followed by monthly payments until the full cost of the car has been met.

When the full cost of the car has been met, the buyer will take full ownership of the vehicle. Hire Purchase is similar to Personal Contract Purchase (PCP) in that the financer will pay a deposit and monthly payments until they have paid off the full cost of the vehicle.

The main difference is that customers can give the car back at the end of a PCP finance scheme, whereas they will own the vehicle once they have paid off the full amount of their Hire Purchase arrangement.

The cost of a Hire Purchase finance option is based on the price of the car chosen, the size of the agreed deposits and the number of instalments (usually over a 24-60 month period).

Hire Purchase example

The following is an example of a Hire Purchase finance scheme for a customer wanting to finance a Peugeot 3008 Access 1.6 VTI 120.

In this example, the customer’s contract will be for 48 months, with an initial deposit of £3,279 and 0% APR representative.

A breakdown of the payments would be as follows:

48 Monthly Payments - £273.00
Customer deposit - £3,279.00
On the road price - £16,395.00
Total amount of credit - £13,116.00
Term of agreement - 48 months
Total amount payable - £16,395.00
Fixed rate of interest - 0.0%
Representative - 0.0% APR

Pros:

  • Customers will be able to drive a car that they might not have been able to purchase outright. This can be done in the knowledge that once all payments have been completed, they will own the vehicle
  • The loan is secured against the car, making it easier to get the finance for it and at a reasonable interest rate
  • Although the monthly payments may be higher than other forms of finance, a Hire Purchase will ensure that customers will pay less to own their chosen car overall

Cons:

  • Until the Hire Purchase arrangement has been paid off in full, the customer will not be able to modify or sell their car without written permission from the finance company
  • If customers fall behind with their payments, the finance company will be able to repossess their car
  • The customer will be liable for any damaged caused to the vehicle during the period of their Hire Purchase agreement
  • Interest rates can be high with a Hire Purchase, depending on the credit rating of the customer
  • Some Hire Purchase contracts may include a hefty ‘option to purchase’ fee that will be payable after all monthly payments are complete – similar to a PCP finance scheme

Why should I opt for a Hire Purchase (HP)?

A Hire Purchase finance scheme would be suitable for a customer who wants to drive the car of their dreams but cannot purchase the model outright.

Those wanting to own their chosen vehicle at the end of a finance contract and not hand it back should choose a Hire Purchase over a PCP finance scheme.

As with a Personal Contract Purchase, a Hire Purchase would be suitable for customers who may have trouble budgeting, as the fixed monthly costs will make this easier.

Opting for a Hire Purchase arrangement involves shopping around for the best deal by comparing the APR representative and total amount repayable. Askaprice saves the customer time and money by offering the best deals without the hassle.