- What do I need to know about Hire Purchase?
- How do I make the most of it?
- Parkers explains car finance terms
Hire Purchase splits the cost of a car into a deposit and monthly payments; pay these and the car is yours.
What do I need to know about Hire Purchase?
Hire Purchase makes buying a new or used car more affordable, by spreading the cost – plus interest in most cases – across a deposit and a series of monthly instalments.
Make all of these payments and you become the owner. Unlike with Personal Contract Hire (PCH) or Leasing – where you hand the car back at the end of the contract – you don’t have the choice to return the vehicle.
Differentiating Hire Purchase from Personal Contract Purchase(PCP) finance schemes – where can you choose whether to buy the car or hand it back – there is no large final payment to make if you wish to buy the car.
As a result, however, monthly payments for Hire Purchase schemes are higher than equivalent PCP deals.
How do I make the most of Hire Purchase?
If you’re sure that you want to own your next car at the end of the contract, you will pay less interest with a Hire Purchase scheme than a PCP equivalent – provided the same APR charge, deposit contribution and discounts apply.
Those with a tight monthly budget, however, will be able to get more car for their money by opting for a PCP deal. Remember that you don’t own the car at the end of a PCP deal, though, unless you make the substantial optional final payment.
Before opting for Hire Purchase, it’s worth comparing APR, deposit contributions and any discounts with the equivalent PCP option. Some manufacturers offer greater discounts on PCP deals – potentially providing both the lowest monthly payments and total amount payable to buy the car.