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Car Finance Expert Q&A

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Edwin Miles. Underwriting Manager

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What is Hire Purchase? Please explain

Please can you explain how hire purchase works for me? I'm struggling to understand the difference between hire purchase, leasing & contract hire.

An explanation would help me decide which route to take. I think it's HP i need but not 100%.

Posted by Russell Armitage on


Hi Russell, a great question and thanks for using the Q&A.

Hire Purchase or "HP" as it's known within the trade is simply a legal contract/agreement where an individual agrees to pay for their goods (in this case a car) over an agreed period of time.

Hire purchase was founded in the UK and is now found in many countries worldwide. Hire Purchase is a great option for people with (or without) a deposit but not the full amount for the goods in question. In effect "HP" allows people to hire a car for a period of 12 to 60 months and when all agreed monthly payments have been made you then own the car legally as the contract has been terminated/settled.

To clarify, the finance company is the legal owner of the car until all payments have been made. When the hire purchase agreement is signed initially an interest rate will be set in place for the term of the agreement and an installment plan/payment put in place. It is imperative that you keep up to date with your monthly payments otherwise it may affect your credit record and in the worst cases the finance company can repossess the vehicle.

Contract Hire & Car Leasing on the other hand is mainly used by businesses but can be used by individuals. Leasing is incredibly simple - you can lease a brand new car (without any initial cash outlay) for a period of 2, 3 or 4 years and at the end of the agreement you just hand your car back to the leasing company for them to dispose of the vehicle. With new cars leasing can be a better option to keep the monthly repayments down but HP has a great deal of benefits too.

I hope this helps clear your question up a little and if you're interested please make an application and once approved you can choose a car from any dealer and we also provide a no obligation quote. Kind Regards, Edwin

Posted by on

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Hi, I'm wanting to get a car on Hire purchase but don't want to go ahead with it if there's a possibility I could get declined.

My credit score is 898 and I don't have any late payments or any ccj's. I recently applied for a personal loan of £2000 and got declined but when I questioned it, they said it was because I have never had any loans in the past and I only have revolving credit.. like store cards, credit card and a few online accounts (very and next). My credit limits have been upped several times on these accounts as I am good at paying on time.

Could you tell me if you think I will be ok? I know it's hard going off this but I just don't want to build my hopes up if I may be declined. Thanks

Posted by Leanne Skolosdra on


Hi Leanne, from what you have said we'd may be able to get you approved for hire purchase as you have a good credit score, no missed payments and some current active credit accounts.

I'm assuming that you have a UK licence and can prove your income if requested . Please make an application when you're ready and if approved you can choose a car from any reputable dealer and we also provide a no obligation quote. Kind Regards, Edwin

Posted by on


Hi, My credit score on Experian is 976 out of 999, would I be approved for a loan? My bank declined me for an unknown reason, they wouldn't tell me why which Is frustrating. Thanks

Posted by Nathan on


Hi Nathan, thank you for your question.

You do seem to have a good credit score so it does seem a little strange that you have been declined for finance by your bank. However, their decisions will be based upon multiple factors (not just your credit score.

They look at address history, your income, employment etc. We can't guarantee an approval for you but we'll certainly try our best to get you an acceptance from one of our large panel of lenders.

Please make an application when you're ready and if approved you can choose a car from any reputable dealer and we also provide a no obligation quote. Kind Regards, Edwin

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Posted by laura pache on

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