Can I settle my HP agreement early?

Yes. You can pay off the remaining balance at any time and the lender will provide an early settlement figure. Settling early usually saves you future interest.

Do I own the car during the HP agreement?

No — the finance company technically owns the car until your final payment is made. After that, ownership automatically transfers to you with no extra fees.

What happens if I miss a payment?

Missing payments can damage your credit score and, if unresolved, the lender has the right to repossess the car. Always speak to your lender early if you're struggling.

What is voluntary termination?

Once you've paid at least 50% of the total amount payable, you have the legal right to return the car and walk away from the agreement under the Consumer Credit Act.

Can I part-exchange a car on HP?

Yes, but you'll need a settlement figure from your lender first. If the car is worth more than the settlement figure, the equity can go towards your next deposit.

Car Finance Explained

What Is Hire Purchase?

Hire Purchase (HP) is one of the most straightforward ways to finance a car. You pay a deposit, fixed monthly payments over an agreed term, and at the end of the agreement the car is yours — with no balloon payment and no mileage limits.

Written and reviewed by Phil Kehoe, Director, Motoring.Today · methodology in our editorial standards.

Last reviewed: July 2026

You own the car at the endNo mileage limitsFixed monthly paymentsNo balloon payment

How HP finance works

HP is a simple 2-part agreement: a deposit followed by fixed monthly payments until the car is fully paid off.

Pay a deposit

Put down an upfront deposit — typically 10% of the car's value, but you can pay more to lower your monthly payments.

Fixed monthly payments

Pay equal monthly instalments over a term between 24 and 60 months. The rate is fixed for the whole agreement.

The car is yours

After your final payment, ownership transfers to you automatically. No balloon payment, no decisions to make.

Illustration of a car financed on Hire Purchase

No balloon payment to worry about

Unlike PCP, HP has no large Guaranteed Minimum Future Value payment at the end — your final monthly payment is the same as every other one.

Own the car No mileage cap

HP finance example

Example based on a car price of £20,000 over 48 months at 9.9% APR representative.

Cash price

£20,000

Deposit (10%)

£2,000

Amount of credit

£18,000

Term

48 months

Representative APR

9.9%

Your estimated monthly payment

£452.02/month

Total interest

£3,696.96

Total amount payable

£23,696.96

Hire Purchase representative example9.9% APR representative

Cash price: £20,000
Deposit (advance payment): £2,000
Total amount of credit: £18,000
Duration of agreement: 48 months
Rate of interest (fixed): 9.5% p.a.
Monthly repayment: £452.02 × 48
Total charge for credit (interest): £3,696.96
Total amount payable: £23,696.96

Motoring.Today is a credit broker, not a lender. Motoring.Today is a trading style of Motor Genius Group Ltd (FRN 960504), an appointed representative of The Compliance Guys Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN 941360). Finance is subject to status and approval; rates depend on your circumstances and the lender. Available to permanent UK residents aged 18+. Example figures only — not a quote.

Example figures only. Your actual payments depend on your credit profile, deposit and the lender we match you with.

Pros and cons of HP finance

HP is simple and predictable, but it's not the cheapest monthly option for every driver.

Pros

You own the car at the end of the agreement
No mileage restrictions or excess charges
Fixed monthly payments make budgeting easy
No large balloon payment to plan for
Simple, predictable structure with no surprises

Cons

Higher monthly payments than PCP for the same car
You don't own the car until the final payment
Less flexibility at the end of the agreement
Car can be repossessed if you fall behind
Generally a bigger deposit needed for best rates

Who is HP best for?

HP suits drivers who want to own their car outright and don't want to worry about end-of-term decisions.

Want to own the car at the end

High-mileage drivers

Plan to keep the car long-term

Prefer a simple, fixed-payment deal

HP vs PCP finance

The two most popular UK car finance options — here's how they compare side by side.

Feature	Hire Purchase (HP)	Personal Contract Purchase (PCP)
Monthly payments	Higher	Lower
Deposit	Typically 10%+	Typically 10%
Mileage limits	None	Yes — usually 6k–15k / year
End of agreement	You own the car	Return, part-exchange or pay balloon
Balloon payment	No	Yes (Guaranteed Minimum Future Value)
Flexibility	Lower	Higher

Frequently asked questions

Quick answers to the most common questions about Hire Purchase car finance.