Buying a car with hire purchase

Hire purchase and what you need to know

Understanding about hire purchase

Buying a car with hire purchase is one of the most easiest car finance plans that can help you get the car you want and the option to buy the car at the end of the hire purchase contract. Let’s dive deeper!

What is a hire purchase agreement UK? How it works?

Hire purchase is one of the many car finance plans that can be used to buy a new or used car. A low deposit is paid and the remaining amount of the car is paid off in monthly installments, for the car loan. You can’t take ownership of the car, until the last payment is made.


Buying a car with hire purchase needs a good credit rating, which is required to get hire purchase deals at low interest rates, it is essential to check the total amount that needs to be paid while comparing hire purchase deals with other car finance methods.


In Hire Purchase, there is an initial deposit on the car that needs to be paid, which is 10% or more of the vehicle’s total value. The remaining value of the car will be paid off in installments over a period of 1 to 5 years.


To know more about hire purchase - here is the Hire Purchase ACT - 1964

What is a good hire purchase rate?

A car dealer or a broker can arrange for buying a car with Hire purchase. For used cars, the annual percentage rate can vary from 4% – 8%. The lower the interest rate, the better. The rate could be higher if you don’t have a good credit score. Do understand all the terms and conditions of your hire purchase contract before signing.


Usually there is a final fee after all the installments have been paid, known as ‘Option to Purchase’, you can own the car once you’ve paid this. It could be around £150-£250, but it is better to ask since the amount could vary. Obtain an outstanding finance check to know more about your used car’s financial status.

Advantages of buying a car with hire purchase

  • Payment is flexible (usually 1 to 5 years), fits in with your monthly budget, the longer the finance term the more you will have to pay in interest.

  • Low deposit required, usually 10% of the car’s total value.

  • Fixed interest rates for the whole contract duration.

  • Return option available for having paid half cost of the car, know more about cutting car finance.

  • No need for large sum of deposit to purchase the car.
buying a car with hire purchase

Disadvantages of buying a car with hire purchase

  • Not possible to own the car before final payment, being unable to pay could result in the car being confiscated.

  • You can’t sell or modify the car over the finance term without permission.

  • Monthly installments are higher than other car finance methods.

  • If deposit is low and and term length is less, then monthly payments will be high.

  • Until 25% of the total amount is paid, lender can reclaim the car without court order.

  • Time consuming, if you need it for a short term, then it is rather expensive

  • TimeYou would clearly be at a disadvantage if you don’t take a car outstanding finance check

Best tips for getting a good hire purchase deal

Buying a car with hire purchase is not an easy thing to do and requires careful consideration into the details that follow. Let’s get to know some things first.


  • Don’t buy impulsively - There is no limited time offer that will disappear once you leave without a contract, there are always plenty of used cars and you don’t need to settle for the first offer you get. Carefully read through all of the terms and conditions.

  • APR - It is known as the annual percentage rate of interest on your hire purchase loan. Compare with other hire purchase deals to know the market rate.

  • Overall Cost - It is easy to obtain low monthly installments (but that would mean that you will have to pay longer and with more interest); whereas high monthly installments would mean less interest and fewer months.

  • More dealers - Approach more dealers, since each of them can offer different benefits. with every other dealer you try, you can get more options.

  • Negotiation - It is good to negotiate, about the car price, the interest rates that you would need to pay up etc.

Buying a car with hire purchase is one of the car finance methods to buy a car, if you are buying a used car that has an existing finance plan, then you should avoid that car, or talk with the concerned owner to make a deal and compensate with a discount. Get a vehicle history report to check if a car has outstanding finance before buying a used car and make an informed purchase.

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