HP Car Finance Explained

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Rates from 7.9% APR. Representative APR 19.8%

Representative example – Borrowing £5,500 over 4 years with flat rate of 10.4% and a representative APR of 19.8%, and a deposit of £0, the amount payable would be £162 per month, with a total cost of credit of £2,282 and total amount payable of £7,782. Finance subject to status. 18+ only.

Let’s explain hire purchase:

Hire Purchase is the most common of all car finance loans and allows you to spread the cost of buying your new car.

An ‘HP’ loan is secured against your vehicle, which means you are effectively hiring the car while you pay back the loan. At the end of the period you will have the option to pay the final purchase fee and the car will officially be yours. The option to purchase fee is typically ONLY £10.

The advantage to HP is that you are unlikely to have the mileage restrictions found on options like PCP, meaning you can drive free in the knowledge that no hidden charges will come your way at the end of the term. HP does however typically come with a higher monthly payment so it really is about what works for your budget.

Depending on the lender, a deposit may be required, however some 0% deposit options are available with certain lenders. This would then be followed by a fixed monthly amount for the period of the loan.

Your monthly payment will depend on a few things:

  • How much deposit you would like to pay
  • The period your agreement runs for
  • The interest rate on the loan
  • The car you decide on

HP Finance… How does it work?

A Hire Purchase (HP) car finance agreement is a loan covering the cost of your new used vehicle minus the agreed deposit amount.

You as the customer will then repay the loan on a monthly basis at an agreed amount plus the interest applied on your chosen package.

A typical agreement will last between 1 and 5 years, with a ‘Purchase Option’ at the end, allowing you to take full ownership of the vehicle. Option to purchase fee is typically around £10.

Looking to buy you new car on Hire Purchase? We will need to run a credit check but don’t worry, loans are secured every day for people with a less than perfect credit score.

Why use CarFinanced for your HP deal?

CarFinanced was built to help people drive the car they really want. Our mission is to give you the options so that you can make the best decision based on your personal circumstances.

No matter what your credit score looks like, we can help find you the best hire purchase deal. So whether it’s the new family car with the big boot, or a 2 seater sports car for a weekend blast, we are here to help.

Should I go with HP?

It’s important to always read the documentation attached to any loan agreement. HP is a good way to finance your new car if:

  • It’s important that you own your new car outright
  • You don’t like changing your cars on a regular basis
  • You cover a lot of miles per year

Bad Credit? We can help

Poor credit certainly isn’t stopping drivers across the UK so why should it stop you? In fact, HP is one of the best options for people with a poor credit score.

Yes, your monthly payments may be slightly higher, but you will own the car at the end of your payment term. Ensuring you make your payments each month could also help improve your credit score.

Here at CarFinanced, we work with a range of lenders to ensure we can help drivers with a variety of credit histories get into a new used car. And that most definitely includes those with a poor credit score.

Pro’s and Con’s of HP

Most cars in the UK are sold on some form of credit scheme. It helps break down the cost of getting you on the road in the car you really want. HP is a good option, but may not be right for you so we’ve broken down the pro’s and con’s for you below:


  • Following the completion of your payment plan, you will own the car
  • Typically, there are no mileage limitations
  • There is no nasty balloon payment at the end of the term
  • You can borrow the money and pay back over 1 to 5 years


  • Monthly payments are typically higher because there is no balloon payment
  • The lender may authorise the sale or modification of the vehicle during the term

  • All payments must be made before you own the car
  • A guaranteed future value is not in place like it can be with PCP

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Applying with us only takes a couple of minutes and won’t affect your credit score

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So what about HP vs. Leasing?

It’s a very common question and although we don’t offer leasing, it could still be the right option for you. Before you make a decision, think about a couple of points…

Do you like to own your cars outright?

If this is a major factor in your car buying journey, then HP is a great option. You will own your car at the end of the payment term. If you prefer to change your car more frequently and owning the car is of less importance, then leasing may be a better option.

Leasing may come with restrictions.

If you don’t want to be limited on the miles you drive, then leasing is possibly not the option for you. You may also find tight restrictions on the condition of the car upon its return, with fees potentially being applied.

It may be that neither of these options are right for you, but luckily there is a third option that sits somewhere in the middle. This option is called PCP.

What about a personal loan?

Are you thinking about a personal loan for your next car purchase? There are a couple of points you need to be aware of.
How important is owning the car quickly?

Car ownership is something that applies to both HP and Personal Loan options. The difference being that with a personal loan, you own the car as soon as you pay the seller. You can also sell or modify the car whenever you wish without permission from a third party.
This luxury comes at a cost…

Personal loans can often come with a higher interest rate than other finance options, including HP. This means your monthly payments may be pushed beyond your budget, with the total amount payable potentially being considerably higher.

Frequently Asked Questions

At CarFinanced, we allow everyone to check whether they are eligible to be approved for finance within a few minutes. Share some small details with us and our lenders will use that information to carry out a soft credit search to give you an answer with the best deals right away.

If you have a poor credit history, you can still apply for car finance. The company will look at your personal circumstances such as; Your employment status, age, income, loan amount, alongside your credit history. You will then receive your exact interest rates and payments.
Yes! You can part-exchange your car as a deposit.

Annual percentage rate (APR) is the interest rate applied to your loan. Predominantly, it is the yearly cost of your borrowing. You will pay this on top of the sum that you have applied for. If you take out a long-term loan, the total amount payable will be more, as you will be paying interest for a longer amount of time.

Yes, if the provisional is less than 3 years old.
Our average transaction takes less than 24 hours to complete from beginning until the end.
Unfortunately, you are legally required to be 18 years or over in order to take out car finance.
If you choose HP, you will own the car at the end of your finance term, whereas if you opt for PCP, you can either choose to hand the car back or pay a balloon payment determined by the final purchase price of the car.
If you would like someone else to be able to drive your car, you may be able to add them as a named driver on your car insurance policy.
With your permission, we can pass your details on to insurance companies who can provide this for you.
Depending on the age of the car and the lender, between 12-72 months.
To be eligible for a quote, you need to be at least 18 years old, have a drivers license and earn at least £1000 per month.
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