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 the most basic form of a car leasing deal and is available as both a business and personal lease.
You’ll arrange a finance plan, which includes making an initial deposit on the vehicle. After this you’ll pay monthly instalments for a set period of time. This could be anywhere between 24 and 60 months.
Once you have made all payments, you’ll have the option to either buy the vehicle, walk away or even start a new lease contract. If you choose to purchase the vehicle, you’ll pay what was agreed at the start of the arrangement. This will typically be the cost of the original vehicle after subtracting projected depreciation rates.
With any form of Hire Purchase, it’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, it’s always wise to check your credit history before making an application for leasing.
How does Hire Purchase (HP) work? With Hire Purchase agreements, you’ll first need to make a down payment (deposit). This can be three to six months’ worth of monthly instalments or a deposit up to 10% of the vehicle’s value. Once this initial payment has been made, you’ll have access to the vehicle and will start paying your monthly fee. This can be anywhere from 12 to 60 months. The vehicle doesn’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 you’ve previously agreed to. With HP you can also benefit from excellent interest rates, especially on new vehicles – making the whole process worthwhile for those considering a motor. For used cars you’ll often find interest rates less competitive. Throughout the contract, the loan is secured against the vehicle – 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 don’t move out of your budget and can afford the monthly instalments
- There’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 car’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.