Hire Purchase (HP) finance guide
Hire Purchase (HP) is a popular and common vehicle finance product that spreads the cost of buying a new or Approved Used car. How does a typical Hire Purchase deal work? We’ll explain it all here.
Mon Motors HP deals
What is Hire Purchase (HP)?
If you plan to buy a brand new car, or an Approved Used car or van, and would prefer to spread the cost of that vehicle rather than paying for it in full as soon as you take hold of the keys, Hire Purchase (HP) is a good option.
Compared to two other popular finance products — Personal Contract Purchase (PCP) and Personal Contract Hire (PCH) — the monthly payments required on a typical HP plan might be on the higher side. But, the benefit comes at the end of the agreement - with a HP deal, providing you’ve completed all the monthly payments, the vehicle is yours to keep.
Hire Purchase deals are available across all Mon Motors brands, including Audi, Volkswagen, Škoda, SEAT, Ford, Volvo, CUPRA, Volkswagen Commercial Vehicles and Ford Commercial Vehicles. Contact your nearest Mon Motors dealership for more information on Hire Purchase.
Understanding Hire Purchase
How does HP finance work?
A Hire Purchase (HP) agreement is a straightforward way to fund your next car.
Once you’ve chosen a new or Approved Used car or van to buy, you’ll pay a deposit to secure the vehicle. How much the deposit is depends on the make and model of car you’re buying; the more you can pay as a deposit, the less you have to cover during the length of the agreement. The finance lender is likely to have a maximum amount they would accept as a deposit, however.
Next, with the support of a Mon Motors finance specialist, apply for HP finance and choose the term of the agreement. This usually ranges from two to five years (24 to 60 months). A shorter term means higher monthly payments but less interest overall, while a longer term reduces the monthly cost but may increase the total interest paid. We will work with you to tailor the arrangement to suit your budget.
Unlike some other finance products, HP agreements have no mileage restrictions. At the end of the term, once all payments have been made, you will own the car outright.
What to expect when your HP agreement ends
What happens at the end of a HP agreement?
At the end of a HP agreement, the car is yours! Well, this is assuming that you have maintained your monthly payments throughout the duration of the agreement and don’t have anything more to pay.
With some HP agreements there may be something called an ‘option to purchase’ fee. This is a final payment to confirm ownership of the vehicle and is detailed in your contract from the outset. The fee is typically minimal and can be as low as £10.
Until the full balance is paid, the vehicle legally belongs to the finance company. If payments are missed, they can repossess the car, and your credit rating may be negatively affected, which could impact future finance applications.
Once the car is yours, what happens next is up to you. Of course, you can continue to drive it but if you’ve had it for a number of years you can also decide to sell it, or part-exchange against another vehicle.