Hire Purchase (HP) For Your Next Car
Hire Purchase (HP) is a straightforward way to finance your next car. You pay an initial deposit, followed by fixed monthly payments over a set term, typically 3-5 years. At the end of the term, you own the car outright. This option is ideal for those who want to own their vehicle without the complexities of other financing methods.
Hire Purchase loans give you a lot of flexibility on where you can borrow from. This allows you to look at a wider selection of lenders to secure the lowest possible interest rate on your loan. Some dealers might offer certain benefits or savings if you secure finance directly from them, but be sure to balance this against the rate of the loan they offer, as these dealer finance deals aren’t always the best. You might be better off looking at bank loans or other sources of finance, as these often offer lower rates which could potentially save you a lot over the course of your loan..
Advantages of HP
Generally, Hire Purchase is good for people who care about the overall long-term costs of buying a new vehicle. Since you own the car outright once your loan is finished, the longer you keep the vehicle, the better your overall real monthly cost becomes.
Disadvantages of HP
The main disadvantage of Hire Purchase is that it often has the highest monthly payments. This can limit your options for the type of vehicle you can afford. Another potential downside is that if you secure finance from a bank or somewhere else, you might struggle to negotiate a good deal on a car with the dealer. This is because dealerships often make money off the back of securing you into their own finance deals. You are, of course, free to sign up to a dealer's finance to get a good deal, though, then back out in the statutory cool-off period and pay the balance off with the cheaper bank loan.