What is HP Finance? Your Guide

One of the most common types of car financing is hire purchase (HP) car finance agreement. It permits you to purchase a vehicle and pay for it over a set period, usually over a few years. You will own the car outright once the final payment is made.

It is an excellent way for people to obtain the car they have always desired without having to pay for it in full. Most people require vehicles to meet their daily needs, such as employment and/or childcare. However, purchasing a car can be costly, especially when buying a new one. That is why hire purchase finance is so popular and why so many people use it to purchase their dream car.

What is HP Finance? Is It a Popular Loan Product?

Have you ever asked yourself: what is hp finance? HP car finance, also known as a Hire Purchase car loan, is a popular type of car financing. Similarly, there is Personal Contract Purchase (PCP finance), which you can learn more about here.

It enables you to purchase a vehicle and pay for it over a set period, usually over a contract that lasts a few years. You will own the car outright once the final payment is made. This can be at the end of a set number of payments or when there are no more payments owed.

HP is available from many major UK lenders for both new and used vehicles. But how exactly does it work?

When thinking about what is HP finance, you will need to make two monthly payments. To begin, you must make a deposit on the vehicle. This is typically 10% of the vehicle’s value. Second, you make monthly payments on the vehicle for the duration of your agreement to pay off the remainder of the car (with added interest). Hire purchase agreements are typically for one to five years.

How Do Car Finance Products Work?

If you paid a deposit on the car, the amount will be deducted from your total repayments. You’ll still have to make monthly payments, but they’ll be lower because you’re borrowing less money overall. The deposit amount varies by vehicle and finance provider, so check with them before making an offer on your new car. It’s also a good idea to investigate the interest rate that will come with the car you want to buy.

The remaining balance of your loan will be repaid in equal monthly instalments over an agreed period of up to 48 months (typical maximum term), with Bright Motor Finance charging interest at 19.9% APR (Annual Percentage Rate). Our knowledgeable specialists will walk you through the process and could help you get the car you want.

Benefit from Fixed Monthly Payments

In essence, HP financing gives you access to a vehicle for a set period (the agreement period), with a set monthly payment. When considering what is HP finance, think of it as a contract. Bright Motor Finance is a car brokerage service that offers this finance service.

What Is a HP car loan? Does It Work?

In a nutshell, HP financing allows you to buy a vehicle, such as a car, without paying for it in full and instead making monthly payments until the end of your agreement period. You owe nothing until the end of your agreement period, at which point you own the vehicle outright. Similarly, if you have paid off any outstanding payments by the end of the agreement, you own the car.

Can I Settle My Car Loan Contract Before the End Date?

It is feasible. There is no penalty if you pay off the remaining balance on your HP finance agreement before the contract expires. Especially due to any changes in your financial situation. Your total settlement amount will be calculated by the lender, and once paid, you will own the vehicle outright. Just make sure you make contact with your finance lender so they can make the necessary arrangements.

The Benefits of HP Car Finance

  • Your monthly payments can be tailored to fit your budget.
  • It could help improve your credit score (if you make payments on time).
  • You could avoid paying any additional fees at the end of your contract.
  • You may be able to purchase the vehicle at the end of your contract.
  • Mileage restrictions will not apply to the car finance agreement.

Things to Think About When Considering HP Finance Agreements

  • Hire purchase finance payments are typically more expensive than other financing options.
  • You are restricted from modifying or selling your car during your agreement.
  •    You must repay all of the payments, which may be difficult if you are experiencing financial difficulties.

The Criteria You Need to Meet Before Signing the Agreement.

As with any credit product, make sure you meet these requirements before applying.

You should:

  • Examine your credit history. This gives you an advantage when deciding which car to buy. Lenders will see you as dependable when it comes to making payments. Even if you have bad credit, we may be able to assist you. People with most financial circumstances may be considered by our panel of lenders.
  • You must be over the age of 18 and have lived in the UK for at least 12 months. You must also have a valid UK bank account and an active UK driver’s licence. You must have a source of income, either through employment or benefits (although you will have a better chance of being accepted for car finance if you are employed).

To Finish

We hope this guide has helped answer the question: what is hp finance? And any other questions you might have had about this finance product. If you have any additional questions about HP finance not covered in this guide, or anything else related to buying a car, please get in touch with us. We’re here to help you find the right loan for your needs and give you all the information required to make an informed decision.

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Rates from 10.9% APR. Representative APR 19.9%