Hire Purchase (HP) finance

To get started, all you’ll need is to fill in a short form or complete a few questions using our handy app.

We’ll ask you to share a few personal details so we can check your eligibility – this will involve a soft credit check but don’t worry, it won’t affect your credit score.
 
We’ll need you to tell us:

• Your full name
• Your date of birth
• Your current address and how long you’ve lived there
• Your employment status
• Your income before tax

How much you’d like to borrow
To take things to the next step and complete your application, we’ll also need a few documents:

• Proof of ID – this can be a passport or full UK driving licence
• Proof of address – such as a Council tax statement or utility bills
• Proof of income – such as payslips or bank statements

To pay off HP finance early, you’ll need to get a settlement figure. You can ask the lender for this at any time. They’ll give you a figure that represents the amount you’ll need to pay to end the loan early, which usually includes the remaining payments minus any interest you’ll no longer need to pay. An early settlement charge might also apply.
 
Once you’ve settled up, you’ll become the car’s official owner.

When you reach the end of your HP finance agreement, you’ll typically need to pay an Option to Purchase fee. This is a small amount that covers the admin costs associated with transferring car ownership over to you.
 
Once all your monthly payments and this final fee have been paid, you’ll be the car’s legal owner.

Accidents come in all shapes and sizes. If you’ve just scratched the bumper or scraped your car's paintwork, you’ll be responsible for paying for it being repaired at your local mechanic.
 
If your accident was more serious and you ended up with a write-off, what happens next depends on your insurance. You should receive a payment that reflects the current value of the car, and you can use this to pay the finance company and settle the outstanding finance. The insurance payment might cover the full amount or leave a shortfall and you’ll need to pay the difference either outright or with a new loan.

When you apply for HP finance and get past the initial eligibility stage, the lender will likely run a hard credit check to make sure the loan is the right fit for you.
 
This check will be visible on your credit report, and it could negatively impact your score if you have too many hard searches in a short time.
 
Once the finance is approved, your credit score will dip because you’re increasing the amount of debt you have. The good news is that this should only be temporary; once you start making payments, your credit score will recover. However, if you fall behind with payments, your credit score might be damaged.

You won’t become the car’s owner in an HP deal until your loan term ends and you’ve paid the Option to Purchase fee.
 
This means you can’t sell the car midway through your agreement – put simply, it’s not yours to sell!
 
If you do want to change cars early, you’ll need to settle your finance first before you can put the car up for sale or offer it as a part-exchange.

If you’re struggling with your finances and falling behind with your Hire Purchase payments, you could be at risk of having the car repossessed. Your credit score could also take a hit if you make a late payment or miss it completely.   
 
It’s best to speak to the lender before you get to this point as they may be able to adjust the terms of your loan to help you get back on track. You might also qualify for a refinance loan with a longer loan term that could reduce your monthly repayment amount (although you’ll likely pay back more in interest overall).