Hire purchase

With hire purchase, you'll make monthly payments to the lender as they will own the car, and at the end of the agreed term (usually around 3-5 years) after all payments are made you will then own the car.

Example

Here's an example of a hire purchase agreement on a £10,000 car

Assuming a deposit of £2,000 (20% of the car's price) and a loan term of 3 years:

  • The amount to be financed is £8,000
  • The interest rate is 7% per annum
  • The total interest charged over the loan term would be £1,470
  • The total amount repayable would be £11,470
  • The monthly repayments would be approximately £318

So, with this example, you would pay a deposit of £2,000 and then make 36 monthly payments of £318.

Once all payments have been made, you would own the car outright. It's important to remember that the interest rate and fees may vary depending on the lender, credit score of the borrower, and other factors, so be sure to shop around for the best deal.

Pros

  • Low deposit
  • Don't necessarily need a good credit score
  • Fixed interest rate

Cons

  • You can't sell or modify the car until all payments have been made
  • More expensive payments than PCP