Hire Purchase

Hire Purchase (HP)

Hire purchase is a car finance in which you can buy a car. You have to pay an initial deposit upfront and the rest of the amount is spread over a time duration until you pay it in full. In hire purchase, the deposit amount is usually 10% of the car’s value.

When you have done with your final monthly payments, and the settlement payment you get to be the legal owner of the car.


Working of Hire Purchase

When you go to buy a car, you can get a hire purchase car finance from the finance company or the dealer itself.

Whenever you go to buy a car your first step would be to choose a car of course. After that, you have to make an initial deposit (10 % of the car value). You can negotiate the deposit amount with some dealers, but mostly it is fixed and usually low. The rest of the car value amount is then spread over a time period which you need to pay in monthly instalments. The interest rate is fixed and does not vary.


How Much Can I Borrow in Hire Purchase?

“How much can I borrow for a car?” is the question that you need to ask yourself. This will help you to manage your financial spendings according to it. There’s no fixed amount when it comes to borrowing money for a car. It depends upon credibility and the value of the car that you want to buy.

Having a good credit score can help you to borrow a large amount for that dream car of yours.


hire purchase

What If I Miss My Monthly Repayments in Hire Purchase?

If you are having difficulty making your repayments, you can talk with your lender regarding it. They may come up with a solution which helps you to make repayment of the outstanding amount over a set period of time. This will help you with your monthly expense and also make your repayments affordable. The lenders may also come up with a new repayment agreement or extend your current agreement.

However, this is not the case always, if you miss your repayments for several months your car can be repossessed. Your car can be repossessed if you have paid less than one-third of the hire purchase price if you have paid more than that the lender can’t take away your car without any legal action.


Advantages and Disadvantages of Hire Purchase


  • The deposit amount is normally low for hire purchase
  • The monthly repayment amount and the interest rates are fixed
  • You don’t have to pay a final settlement payment to own the car at the end of your contract
  • You can also return your car before your contract if you have paid half or more than half of the car value



  • You don’t get to own the car till you have made all the payments
  • If you miss your monthly repayments for a few months you can lose your car
  • Selecting a short-term deal can end up being costly for you


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Where can I get a personal loan with bad credit?