CS finance vs. HP finance for cars - Which is right for you?

There are a few different types of car finance, and we understand it can be a bit confusing sometimes to work out the difference between them and which is the best fit for you.

At Car Finance 247, we only offer Hire Purchase (HP) and Personal Contract Purchase (PCP) finance, but another popular option you might come across is Conditional Sale (CS).

There’s not a lot of difference between HP and CS. They’re very similar, but it’s worth understanding how they both work and what sets them apart. So if you’re weighing up CS vs HP finance, this guide will help to clear up any questions you might have.

What is CS finance vs HP finance?

So what is CS finance vs HP exactly? Let’s get into it.

CS and HP are both straightforward and follow a similar structure. These finance types are quite similar, so it can be hard to tell the difference and which might be most suitable for you.

Both types of car finance are designed for people who want to own their car at the end of the loan term, unlike PCP (Personal Contract Purchase), which offers more flexibility around ownership.

The main difference is simply that with HP, you usually need to pay a small ‘option to purchase’ fee at the end to own the car, but with CS, ownership is transferred automatically at the end of your agreement.

What is Hire Purchase finance?

Hire Purchase (HP) is a type of car finance where you pay for a vehicle in monthly installments. You may pay a deposit upfront, followed by fixed monthly payments over an agreed term, plus interest.

You don’t own the car until the end of your car finance agreement. At that point, you typically have the option to pay a small ‘option to purchase’ fee at the end to transfer ownership over to you. If you don’t pay this, the car isn’t yours.

For example, Jenny chooses a car, pays a deposit, then makes monthly payments for 24 months. At the end, she has the option to purchase by paying a small administrative fee of £200, or alternatively she just returns the car to the lender.

HP is a popular car finance choice. In fact, according to the Financial Conduct Authority, around 31% of UK adults who use motor finance choose HP. It also states that 6.1 million people hold any motor finance product, which means an estimated 1.89 million people have a HP agreement.

What is Conditional Sale finance?

Conditional Sale (CS) works in a similar way to HP. You may pay a deposit, followed by fixed monthly payments over a set term. The key difference is that the ownership transfers automatically at the end of the agreement, without a fee.

For example, Dave chooses a car, pays a deposit, then makes monthly payments for 36 months. After the final payment, ownership of the car is automatically transferred to him.

CS finance is a bit less common than HP. The same FCA study suggests 7% of UK adults who buy motors on finance use CS. That means out of the 6.1 million people with a motor finance product, 427,000 have a CS contract. So while less popular than HP, there are still many people choosing this as a car finance option.

Benefits and drawbacks of CS or HP finance

Because these car finance types are very similar, they both share pros and cons.

Pros

• No large upfront payment compared to buying outright

• You can tailor your loan term and monthly payments

• Unlike PCP, there’s no large balloon payment to keep the car

• No mileage restrictions or wear and tear charges

Cons

• Total cost tends to be higher due to interest

• Less ownership flexibility at the end of the agreement

• Usually larger monthly payments than PCP

• You don’t own the car until the final payment is made

What’s the difference between CS and HP car finance?

Understanding the difference between CS and HP car finance comes down to a few key details. The main difference is the small fee you pay to transfer ownership with HP, which isn’t the case with CS.

Here’s HP vs CS finance at a glance:

	Conditional Sale Finance (CS)	Hire Purchase Finance (HP)
Deposit	Can be optional, or typically 10%	Can be optional, or typically 10-20%
Monthly payments	Fixed, often 2-5 years	Fixed, often 2-5 years
Ownership option	Automatic ownership on final payment	Requirement to pay administrative fee or return the vehicle (usually minimal - £100-£200)
Maintenance and repair	You’re responsible from the start	Depends on agreement terms
Insurance	Lender will require fully comp insurance	Same
Suitable if you have poor credit?	Potentially, credit is subject to status	Potentially, credit is subject to status
Ability to modify or sell the car	Rarely	Possibly
Cancelling the contract?	Yes, must usually have paid at least 50%	Same

CS or HP finance - which is right for you?

When deciding between CS finance or HP, it really comes down to your personal preferences. Here are some considerations to help you decide between them.

When is CS finance preferable to HP?

CS might suit you better if:

• You’re 100% sure you want to keep the vehicle at the end of the contract

• You want a simple contract and no surprises

• You don’t need any flexibility on ownership

With CS, there are no extra decisions or steps to think about at the end. It suits people who are confident about their decision and just want a straightforward way to pay for their car over time.

When is HP preferable to CS?

Hire Purchase may be a better fit if:

• You want more flexibility for early termination

• You’re not 100% certain you’ll want to keep the car

• You might want to upgrade at the end or simply return the car

HP is also straightforward. But arguably, it’s the more flexible option of the two. You don’t always know what your financial situation will look like in the future, so it allows you to avoid tying yourself down too long, while still knowing you have the option to keep the car at the end. As the FCA study shows, HP is more popular than CS, likely because of this added flexibility.

At Car Finance 247, we offer HP, but this article is simply to give an objective overview of CS vs HP finance.

Conclusion: Understand the difference between CS and HP finance

Now you know the difference between CS and HP finance, you can make an informed decision. Both options let you spread the cost of a car and own it at the end, but they suit slightly different needs. They’re extremely similar, CS is just slightly simpler and more fixed, while HP offers a bit more flexibility over ownership.

Both are potentially good options, but which is the best choice for you will depend on your personal situation. You can read more about different car finance types on our car finance explained page to weigh up more options.

Disclaimer: Car Finance 247 Limited is a credit broker, not a lender. Finance is subject to status and affordability, and approval is not guaranteed. We do not provide financial advice. Rates and terms may vary depending on your individual circumstances. Terms and conditions apply, and you should read these carefully before entering into any agreement.