If you're in the market for a vehicle, but can't pay upfront, there are finance options available, including the ever-popular, Hire Purchase (HP), which has been around for almost as long as there have been cars.
Simply, Hire Purchase is a type of finance agreement, that allows a vehicle to be hired over a set time period (usually 12 - 60 months/1 - 5 years), until all repayments have been made, and the fee to purchase, has been paid; until then, the vehicle remains the property of the finance company.
After finding the vehicle that you want to purchase, you can apply for HP for the amount that you need. The loan rate and cost of the vehicle determine the monthly repayment amounts.
After an initial deposit is made, monthly payments are paid for a fixed period, and then a final option to purchase fee is paid to the lender who then transfers the ownership title of the vehicle to the customer.
There is an element of flexibility with Hire Purchase, as you can lower your monthly payments by putting down more of a deposit, or if you are unable to find the funds to do this, you will pay more on a monthly basis. You can also pay a lump sum of any outstanding repayments, to become the vehicle's owner earlier than agreed.
As the loan is secured against the vehicle, there is a danger that the car is repossessed if the repayments aren't made. Whilst this sounds like too much of a risk for the customer, it also means that the lender is more willing to lend, especially to those that would usually be turned down for a personal loan.
There are options to consider at the end of the HP agreement. If you definitely want to purchase the vehicle, owning it fully and legally, you pay the ownership transfer cost, which is either added to the last payment or spread across the course of the agreement with some of our lenders; check your HP agreement so you know how much this fee is. If you want to hand the keys back, you must ensure that the vehicle is in good condition, as any excessive wear and tear or damage, will likely incur additional cost. For more information on wear and tear, please see the BRVLA Wear and Tear Guidelines.
Note that the vehicle cannot legally be sold without informing the finance company, until it is fully paid up and transferred in to your name.
