Hire Purchase (HP) is a type of finance agreement commonly used by motorists to buy cars in the UK. With HP, you agree to make regular monthly payments over a set period until the full cost of the vehicle is paid off. At this point, you become the outright owner of the car.
For example, imagine buying a car worth £20,000 using an HP agreement that requires 48 monthly payments of £500 each. During the term of your agreement, the lender retains ownership of the car until you’ve made all your payments. Once you've completed those 48 months and paid the final instalment, the car is yours free and clear.
HP matters because it allows consumers to spread the cost of a new or used vehicle over time without having to pay for the full amount upfront. This can make owning a car more affordable and accessible. However, it's important to carefully consider your financial situation before committing to an HP agreement, as missing payments can lead to repossession.
HP agreements are regulated by the Consumer Credit Act 1974 (as amended), which sets out rules about how lenders must treat consumers when offering finance deals. For example, they must provide clear information on terms and conditions, interest rates, and any early settlement costs.
A practical tip for motorists considering HP is to shop around for different agreements and read all the small print carefully. Compare various offers from dealerships and independent financiers to find a deal that suits your budget and financial goals.
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.