The Hire Purchase Act 1964 is a UK law that protects buyers who purchase a vehicle in good faith from sellers who do not actually own the car because it’s still subject to hire purchase (HP) finance. This means if you buy a car from someone thinking they’re the rightful owner, but it turns out they don’t legally own it due to ongoing HP payments, the Act shields you from being held responsible for those payments.
For example, imagine you buy a second-hand car through a classified ad and pay £5,000 upfront. The seller tells you the car is fully paid off when in reality, it’s still on hire purchase with monthly payments of £400 due to the original finance company. If the seller disappears or doesn’t make those payments, the finance company could come after you for the outstanding debt.
This Act matters because it ensures that consumers aren't left holding the bag if they unknowingly buy a car that’s still on HP finance. It also puts the responsibility back on the seller to ensure the vehicle is free from any financial encumbrances before selling it.
Under this legislation, sellers must inform buyers when a car is not fully paid off and should provide proof of ownership or clearance from the finance company. This helps prevent fraudulent sales practices and protects honest buyers.
Before buying a used car, always ask for proof that there are no outstanding hire purchase payments. If you’re unsure, consider contacting the DVLA to check if there are any restrictions on the vehicle’s registration.
How This Relates to the FCA Redress Scheme
The FCA motor finance redress scheme covers 12.1 million agreements with an average compensation of £829 per agreement. The total cost to firms is £9.1 billion. If you had PCP or HP finance between 6 April 2007 and 1 November 2024, you may be eligible. The final deadline to complain is 31 August 2027. You do not need a claims management company.