HP
car finance

Hire Purchase (HP) car finance is an easy way to pay for a new car over time. With a low deposit and fixed monthly payments, you can drive off in a car you love without paying the full price upfront. CarFinance makes HP finance simple and reliable, helping you get on the road with confidence.

What is Hire Purchase (HP) and how does it work?

Hire Purchase (HP) is a type of finance that helps you spread the cost of a car into monthly payments. You’ll pay a deposit, then cover the remaining cost of the car over an agreed term. The finance provider owns the vehicle during the agreement, but once you’ve made the final payment and paid the ‘option to purchase’ fee, the car is yours.

You can use HP to finance the purchase of a new or used car. It’s a straightforward plan. You always know what you’ll pay each month. But missed payments can have a negative impact on your credit, so it’s important to understand your finance contract. At CarFinance, we make it easy to check your options, so you can choose a finance plan that fits your budget.

How to calculate your Hire Purchase (HP)

Calculating your monthly HP payments is easy:

1. Start with the car’s total cost (the price before any deposit).
2. Decide on your deposit, usually 10-20% of the total. A larger deposit lowers your monthly payments.
3. Choose the loan term, from 12 to 60 months. Longer terms mean smaller payments but more interest overall.
4. Subtract your deposit from the car’s price to see the amount you’re financing.
5. Divide this amount by the number of months in your term for an estimate of monthly payments.
6. Add interest, typically around 8-10% of the financed amount, for a more accurate monthly payment.

Can you get Hire Purchase with bad credit?

Sure you can, because bad credit doesn’t have to stop you from getting a car you need. This type of car finance is often more flexible because the loan is secured against the car, which gives the finance lender added reassurance. So even if your credit history isn’t excellent or good, you still have a real chance of approval. If you pay on time, it can even help improve your credit. At CarFinance, we work with trusted lenders to help you find a suitable finance agreement. Try our car finance calculator to see what a car on HP finance could look like for your budget.

Will my monthly repayments be higher if I have bad credit?

If you have bad credit, your monthly repayments will likely be higher. The finance lender charges more to cover the risk linked to a lower credit rating. But the difference is often small, sometimes less than £20 a month. We’ll always show you the full cost upfront, including the impact on the total cost of credit. And you can use our car finance calculator to see how different credit profiles affect your finance agreement before you apply.

Do I need a deposit to buy a car on Hire Purchase with bad credit?

In most cases, you’ll need to put down a deposit of around 10% to 20%. It shows the finance lender you're serious and helps lower the total cost of credit over your contract. But not everyone has money saved. If you’ve got a steady income, we can often help arrange hire purchase car finance with no upfront payment. At CarFinance, we’ll look at your situation and match you with a car finance deal that fits.

What happens at the end of the Hire Purchase agreement?

At the end of your car finance agreement, you’ll make a small final payment (known as the ‘option to purchase’ fee) to cover the admin cost of transferring the car into your name. From that point, the car is fully yours—you can sell it, change it, or keep it as you wish, with no need for permission from the finance provider.

Advantages & disadvantages of HP car finance

Hire purchase gives you a structured way to spread the cost of your car, but it’s important to consider both sides:

Benefits:

• You get the car straight away and pay for it over time.
• Only a deposit is needed upfront (typically 10-20%).
• Fixed monthly payments help with budgeting.
• You can choose your repayment term (12 to 60 months).
• No large final balloon payment at the end.
• You gain full car ownership once all payments are made.
• Suitable for both new and used cars.
• Can improve your credit rating if you pay on time.

Disadvantages:

• You don’t own the car until the final payment is made.
• The finance company can repossess the car if you miss payments.
• Total repayments will usually exceed the value of the car due to interest.
• Early repayment may involve extra charges.
• Permission from the finance provider is required to modify or sell the car during the term.
• You may face fees for damage or high mileage.
• Missed payments can affect your credit score.

Is HP car finance suitable for me?

HP car finance could be a good fit if you:

• Want manageable monthly payments
• Don’t have the cash to buy a car outright
• Prefer owning the car instead of leasing
• Have a steady income but less saved for a big deposit
• Need flexibility in your payment schedule and loan term

Speak to our car finance experts to find out if a hire purchase plan matches your budget and ownership goals.