Hire Purchase

If you’re looking to buy a new or used car using finance, then you need to be aware of all the options that are available so you can find your best fit. When it comes to car finance, there are three main options, leasing, Personal Contract Purchase (PCP) and Hire Purchase (HP). Hire purchase is a popular form of car finance, mainly because you have the choice to have full ownership at the end of the term.

Hire Purchase Explained

A hire purchase agreement is when you essentially hire the car over an agreed period set out in a contract, you then have the option to purchase the car once you have made all of your payments.

You do not own the car until all the repayments have been made and then, you normally have to pay a fee in order to change the ownership of the vehicle, which is usually around £100 – £200, but it can vary.

Missing your repayments means you could be putting your car in jeopardy, as your debt will be secured against the car and the lender has every right to repossess the vehicle if you don’t pay all of your repayments in full and on time.

Hire Purchase Timeline

It’s very well knowing what hire purchase is, but seeing the steps that occur during a hire purchase agreement should help you decide whether you think it’s the right car finance option for you.

  1. Consider the car you would like – Car finance gives people the chance to drive their dream car, without having to pay for it upfront. It’s important to ensure you are getting a car that you can realistically afford.
  2. Choose to pay a deposit – We offer no deposit car finance, but by paying a deposit you can reduce your monthly payments.
  3. Monthly repayments – Once everything has been agreed and you have paid the deposit, you will then get to drive your car away and start paying back the money you borrowed on a monthly basis. Although the rate will be fixed, you will be paying APR interest on top, which is typically around 4-8%. If you have paid a healthy deposit amount, then you may pay less interest depending on your lender.
  4. Option to purchase fee – Once you have made all of your repayments and you want to own your car fully, you will need to pay a fee to cover the change of ownership, known as the option to purchase fee which is typically around £100 – £200.

Hire Purchase, PCP and leasing

As the most popular options of car finance, it’s important to understand the difference between hire purchase, PCP and leasing so you can make an informed decision.

Hire purchase and PCP generally take the same form of paying a deposit up front and then making regular repayments, except with PCP, you are repaying the amount the car will depreciate by. This means you generally make lower payments with PCP in comparison to hire purchase.

However, with PCP, you don’t own the car once all of your repayments have been made unless you agree to make a balloon payment, which can often be quite a steep amount.

Leasing takes a similar form of renting a house. You pay a monthly amount for a certain period of time and then at the end of the agreement, you hand back the keys. It’s a cheap option of car finance because you are essentially renting the car and not paying for its value.

When deciding between the three options, the main point to consider is whether you want to eventually own the car. If you are someone who likes to change their car regularly or you want cheaper monthly repayments, then PCP or leasing may be the better option for you, but if after paying for your car you want to actually own it, then hire purchase will be more suited to you.

Why Choose Us?

If you are looking into hire purchase car finance, then by coming to Marsh Finance you will hear your options straight from the horse’s mouth. We are a lender, not a broker, so we are the people who will lend you the money so you can drive away happy in your dream car. If you would like to talk to one of our experts to see if you qualify for a car finance deal, then do not hesitate to contact us

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