Hire Purchase is the simplest way to finance a car. You pay monthly and own it outright at the end.
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HP stands for Hire Purchase. It is the most straightforward type of car finance. You pay a deposit (or nothing on a no-deposit agreement), then make fixed monthly payments over an agreed term. Once you have made the final payment and paid a small option-to-purchase fee, the car is legally yours.
Unlike PCP, there is no balloon payment at the end and no decision to make about handing the car back. You are paying off the full value of the car from day one. This makes HP simpler and more predictable.
Under a hire purchase agreement, the car technically belongs to the finance company until you make the final payment and pay the option-to-purchase fee (typically £10). Until that point, you cannot sell or modify the car without the lender's permission.
HP suits people who want to own their car at the end of the agreement without having to find a large balloon payment. Once you have made all the payments, the car is yours, no further decisions needed.
HP has no mileage limits. You can drive as many miles as you want without worrying about excess charges. If you do high mileage for work or long commutes, this could save you a significant amount compared to PCP, where exceeding the mileage limit means paying 5p to 15p for every extra mile.
HP is also usually cheaper in total than PCP if you plan to keep the car. With PCP, you pay interest on a larger balance for longer because the balloon payment stays outstanding throughout the term. With HP, the balance reduces with every payment.
For a detailed side-by-side comparison, read our PCP vs HP guide.
HP monthly payments are typically higher than PCP for the same car over the same term. This is because you are paying off the full value of the car, not just the depreciation.
However, you are building equity with every payment. By the end of the agreement, you own the car outright with nothing more to pay. With PCP, the lower monthly payments mean you still owe the balloon at the end if you want to keep the car.
The exact monthly payment depends on the car price, your deposit, the term length, and the APR you are offered. A longer term means lower monthly payments but more interest paid overall. A deposit reduces both the monthly payments and the total cost.
You can use the calculator on this page to estimate monthly payments for different car prices, terms, and credit profiles.
Yes, there are two main ways to end an HP agreement before the full term.
Voluntary termination is a legal right under the Consumer Credit Act. Once you have paid at least half of the total amount payable (not half the car's value, but half of everything including interest and fees), you can hand the car back with nothing more to pay, as long as the car is in reasonable condition. This can be useful if your circumstances change and you can no longer afford the payments.
Early settlement means paying off the remaining balance in one go. The lender will provide a settlement figure, which may include an early settlement fee. Once paid, the car is yours immediately. This is worth considering if you come into money or want to sell the car.
Before the halfway point, you can still hand the car back, but you would need to pay the difference to bring your total payments up to 50% of the total amount payable.
HP tends to suit people who want to keep the car long-term and prefer the simplicity of knowing it will be theirs at the end. If you like to buy a car and drive it for years rather than changing every two to three years, HP is usually the more cost-effective option.
It is also a good fit for high-mileage drivers. Without the mileage limits that come with PCP, you can drive as much as you need without worrying about excess charges at the end.
HP is available on both new and used cars. It can be set up with no deposit, and is available to people with a range of credit profiles, including those with bad credit. Subject to status and affordability.
If you are self employed, HP through your business could also have tax advantages. Speak to your accountant for advice on your specific situation.
Wondering how much car finance you can get on your salary? Use our calculator to estimate monthly payments based on the car price, your credit grade and preferred term length.
Check your eligibility for both HP and PCP deals in minutes (Representative 19.8% APR) - with no impact on your credit score. Our partner uses a soft search to give you a quote. If you proceed, a hard search will be conducted which may impact your credit score.
Check Your EligibilityNot the right fit? Check out the other car finance options we cover.
If you are already paying for a car on finance, make sure you are not overpaying on your car insurance too. Comparing quotes from multiple insurers is the easiest way to check you are getting a competitive deal.
Thinking of selling your car? Get a free valuation via our partnership with Motorway.
Common questions about hp car finance.
With a personal loan, you borrow the money and own the car from day one. With HP, the finance company technically owns the car until you make the final payment and pay the option-to-purchase fee. The practical difference is small, but HP agreements are secured against the car, which often means lower interest rates than an unsecured personal loan.
Only at the end. The finance company owns the car until you have made all the payments and paid the option-to-purchase fee (usually around £10). After that, ownership transfers to you. Until then, you cannot sell the car without the lender's permission.
Not without settling the finance first. The car belongs to the finance company until the agreement is complete. If you want to sell, you would need to request a settlement figure from the lender, pay the outstanding balance, and then sell the car once it is legally yours.
Probably, yes. HP has no mileage limits at all, so you can drive as much as you like without facing excess charges. With PCP, exceeding the agreed mileage could cost you between 5p and 15p per mile when you hand the car back. At 20,000 miles a year, that could add up quickly.
It is a small fee, typically around £10, that you pay at the end of the agreement to transfer legal ownership of the car to you. It is set at the start and included in the total amount payable figure in your agreement.
You can settle your HP agreement early at any time. The lender will provide a settlement figure, which is the remaining balance minus a rebate of future interest. Some agreements include a small early settlement fee. You also have the right to voluntary termination once you have paid half the total amount payable.
Yes. HP is available on both new and used cars from verified dealers. The terms may differ depending on the age and value of the car. Used car HP can be a cost-effective way to own a car outright. Subject to status.
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