In part one of our blog we explained all about Personal Contract Purchase, a very popular method when financing your new car. It is very important to understand all the methods that are available to you when arranging finance for your new vehicle. In part two of this three-part blog we are going to explain all about Hire Purchase. We hope these blogs will allow you to make an easier decision when it comes to car finance on your new vehicle.
As always, happy reading!
HP car finance or, as it is formally known, Hire Purchase is another very popular funding method for your new car. Unlike Personal Contract Purchase (PCP), Hire Purchase means you will continually pay a fixed rate monthly payment for an agreed term until the car balance has been paid off. Once you have made all the payments as per the agreement, you will own the vehicle.
HP finance is very flexible, it gives you the opportunity to choose the deposit you can afford and want to put into the payment plan. It means you are then able to find a monthly payment which is suitable to your budget. The larger the amount of deposit put in at the beginning of the agreement means the lower the monthly payment.
Many customers use their trade in price of their old car to provide this deposit. Once the deposit is agreed by both parties this amount is then deducted from the price of the car. The remaining balance is then split equally across the agreed finance term. These terms can vary from anywhere between 12 and 60 months.
The rate of interest and monthly payments with HP finance is always fixed throughout the term of the finance agreement.
The ability to settle your agreement at any time is also an option for you. What is very important to understand with HP finance is, that you will not own the car until the finance has been completely paid off and the last monthly payment is made.
The main differences between HP and PCP are as follows:
Hire purchase is a good funding method for customers who like to keep their vehicle for a longer period or are likely to do higher mileage.
Remember when choosing your type of finance, it is important to understand what you are going to use your vehicle for, the amount of money you would like to spend and how far you are going to travel. These factors will help you when deciding what type of finance to go for.
As always, we hope part one of this blog has helped answer and questions or worries you may have had. Keep your eyes peeled for Part three and if you have any questions on Car Finance please don’t hesitate to contact us, using the links at the top of the page.