Hire purchase is one of the most common ways to buy a new or used vehicle. This guide will help you find out if HP car finance is right for you.
Zuto is a credit broker, not a lender. Our rates start from 10.9% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £8,000 over 60 months with a representative APR of 19.7% the amount payable would be £204 a month, with a total cost of credit of £4,219 and a total amount payable of £12,219.
In its simplest form, hire purchase finance - sometimes just called HP finance - is a type of car loan that allows you to pay for a car in monthly instalments (with interest) over a set period of time, usually between 12 and 60 months (one to five years).
Buying a car on hire purchase means that once the final payment is made, you will become the owner.
With HP car finance, you’ll sometimes have to pay an initial deposit based on the car’s overall value, but after that, the only other payments are your monthly instalments.
Our HP car finance calculator lets you see how much you could borrow:
With hire purchase, you effectively ‘hire’ the car from the finance company until you’ve paid all your monthly instalments – then it’s all yours.
Hire purchase car finance is Zuto’s most popular loan type for used cars, and is generally simpler to understand than the alternative, Zuto PCP car finance, which is based on a car’s depreciation.
HP car finance agreements will vary depending on your lender and quote, but there are usually three easy steps to follow.
A deposit is usually optional. However, the more you can afford to pay upfront, the better - it will lower your monthly payments and reduce the total amount of interest you pay. But a deposit isn’t always essential, and we may even have no deposit options available.
Your repayments are essentially the cost of your car, divided by the number of months your agreements lasts for - plus the annual percentage rate (APR).
For Zuto customers, APR starts at 10.7%, but your rate depends on the lender and your own circumstances; a better credit score generally means a lower APR. Many lenders will allow overpayments to be made if you want to clear the finance quicker, but specific details will vary by lender.
Use our car finance calculator to find out how much you might be able to borrow, based on what you can afford.
At the end of your hire purchase finance contract, there may be a small acceptance or document fee. It can vary, so check before you finalise the agreement. When this and your monthly payments are met, you will own the vehicle.
Hire purchase can be arranged by a broker such as Zuto who specialises in car finance. Using a broker who works with a number of different lenders allows you to search for a range of deals.
One very important thing to know when getting to grips with how hire purchase works is that your lender may require you to pay what is known as an ‘Option to Purchase’ fee at the end of the contract.
This fee is a relatively small amount but must be paid for ownership of the car to be transferred to you. It can vary in price so you should always ask what it will be before agreeing a hire purchase contract, so you can factor it into your budget.
Getting a car on HP finance offers benefits like spreading costs and accessing assets immediately, however it also comes with potential drawbacks, such as interest rates and long-term financial commitments.
Below, we explore both the advantages and disadvantages of hire purchase to help you decide if it's the right choice for you.
There are many advantages of HP finance, making it a very popular choice with car buyers.
While there are advantages to using hire purchase, to determine whether it’s right for you, it’s important to consider the disadvantages as well.
Hire purchase is simple. Here’s a quick example to show you how straightforward it really is:
You’re looking at a car worth £7,500, and you can afford a 10% deposit (£750). This means the finance company will pay the remaining £6,750.
Below, we’ve got a couple of examples – two years and four years. The longer the contract, the less you’ll pay each month; but you’ll eventually pay more in total.
If you wanted to reduce the monthly repayments and spread them over a four-year contract, that would look like this, based on 10.9% APR:
The total amount paid by you for this example would be £9,118.24.
Based on a two-year contract, here’s what you’d pay, based on 10.9% APR:
The total amount paid by you for this example would be £8,302.96.
If you’re looking for the best car finance deals, then you’ve come to the right place. Zuto makes securing a HP car finance deal simple, offering flexible payment and expert guidance. Our trusted services will help you find the right finance agreement for your needs and budget.
It’s always important to look for the best deals when choosing between finance options. At Zuto we work with a large panel of lenders to try and find the right agreement to meet your monthly budget.
Questions you should be asking include inquiring about potential APR rates, your total repayable amount, the total cost of your credit, and any additional fees you might be required to pay.
You should never rush into an agreement when looking for car finance. If you feel that you understand HP car finance but want information on other types of car finance, don’t hesitate to get in touch with the team at Zuto today.
Read our guide on the advantages and disadvantages of hire purchase car finance and how it differs to other finance options available.
Find out more on what the difference is between leasing and financing a car.
Our guide will help you understand the key differences between Hire Purchase and Personal Contract Purchase car finance.
You can usually pay off your hire purchase agreement early via a settlement figure. Contact your lender to find out the best way to do this.
Because interest – known as APR – will be added to your monthly repayments, you will pay more than the vehicle is worth with hire purchase finance. However, the monthly costs mean you might be able to drive a better car than you would otherwise be able to afford when paying the full amount.
The Option to Purchase fee may be required at the end of your contract. For most of the lenders on our panel, it’s usually between £1 and £10, although, with some lenders, this may be higher. Once it’s paid, the car’s yours.
You can finance either a used or new car with hire purchase, although it tends to be most popular for used cars. We’re a trusted finance partner of AutoTrader, and we work with hundreds of dealers who go through our rigorous checks, so if you’re looking for a car, Zuto can help. Once you’ve applied, we’ll offer you a finance option that suits you, and you can search thousands of cars from our verified dealers.
Yes, you can get car finance when buying a car privately. Find out more with our guide to getting finance options from Zuto when you buy a car from a private seller.
To make things easier for you, Zuto has a list of approved dealers – they have to pass our quality checks and tests, so you know you’re dealing with verified and legitimate dealers. When you apply for a quote, you can browse cars from these trusted dealers in your MyZuto account area.
The impact of missing a payment depends on your lender. If you fall behind, you might be able to hand the car back (but you might still owe some money) or the finance company might repossess the vehicle. The best thing to do is to try to calculate what you can afford at the beginning. However, we and our panel of lenders appreciate circumstances can change. Get in touch if this happens.
It’s usually fine to change your car during your hire purchase contract. Contact your lender directly or talk to one of Zuto’s advisers for any support.
Yes, you can still get HP car finance deal with bad credit. At Zuto, we work with a panel of lenders who specialise in helping customers with less-than-perfect credit histories. While interest rates may be higher and terms more limited, there are still flexible options available. Our team will guide you through the process, helping you find a deal that suits your financial situation and gets you behind the wheel.
Finding cheap HP car finance is possible by comparing deals and considering a few key factors. At Zuto, we work with a panel of lenders to help you find the most affordable deals on HP car finance options based on your budget and circumstances. To get the most affordable deal, try to:
Zuto is here to guide you through the process and help you secure the most affordable HP car finance deal.
At Zuto, we make it easy to find the best HP car finance deal tailored to your needs. Here's how we find you the best deals.
No hidden fees: We believe in transparent pricing. With Zuto, there are no hidden fees or surprises when arranging your car finance.
