When it comes to leasing your next car, there are plenty of options to consider. For instance, you may want to arrange a Personal Contract Purchase, Personal Contract Hire, or even a balloon payment. However, when it comes to simplicity, a Hire Purchase contract is by far the popular choice among motorists. Often shortened to just HP, Hire Purchase is available for both business and personal users. Youâ€™ll arrange a finance plan, which includes making an initial deposit on the vehicle. After this, youâ€™ll pay monthly instalments for a set period of time. This could be anywhere between 24 and 60 months.
With any form of Hire Purchase, itâ€™s important to have a satisfactory credit history to your name. All offers made are subject to a credit check from an external agency, such as Experian. Therefore, itâ€™s always wise to check your credit history before making an application for leasing.
How does Hire Purchase (HP) work?
With Hire Purchase agreements, youâ€™ll first need to make a down payment (deposit). This can be three to six monthsâ€™ worth of monthly instalments or a deposit up to 10% of the vehicleâ€™s value. Once this initial payment has been made, youâ€™ll have access to the vehicle and will start paying your monthly fee. This can be anywhere from 12 to 60 months. The vehicle doesnâ€™t belong to you over this time, with you effectively renting its use. At the end of the Hire Purchase contract, you can make a final balloon payment to own the vehicle, but this is no obligation unless youâ€™ve previously agreed to. With HP you can also benefit from excellent interest rates, especially on new vehicles â€“ making the whole process worthwhile for those considering a motor. For used cars, youâ€™ll often find interest rates less competitive. Throughout the contract, the loan is secured against the vehicle â€“ so failure to pay will result in its repossession. Ensure to read through the full terms and conditions before signing the dotted line.
The benefits of a Hire Purchase:
There are a number of incredible benefits for choosing a Hire Purchase contract. This includes:
- Flexible repayments customised to your finances. This ensures you donâ€™t move out of your budget and can afford the monthly instalments
- Thereâ€™s often a low deposit to be made (depending on the vehicle)
- Fixed interest rates are very competitive on new cars
- There are sometimes options available to switch your leasing agreement once half of the carâ€™s value has been paid off
- If required, you can purchase the vehicle at the end of the agreement or even walk away if you choose.