FAQs about Hire Purchase
What is a balloon payment on Hire Purchase?
Hire Purchase agreements do not have a balloon payment like Personal Contract Purchase agreements do. However, 'balloon payments' in relation to Hire Purchase deals may refer to the Option to Purchase fee. This is the final amount you need to pay to own the vehicle at the end of the contract. The Option to Purchase fee in a Hire Purchase plan is much less than a balloon payment on a personal contract purchase.
Can you pay off Hire Purchase early?
Yes. According to Section 99 of the Consumer Credit Act 1974, you have the right to voluntarily terminate a Hire Purchase contract. However, you must have paid at least half of the finance amount.
You will need to request a valid settlement letter which will detail how much you have left to pay in order to exit the Hire Purchase agreement.
If you haven't already paid off half of the finance amount, you can pay a lump sum to bridge the difference.
You may also have to pay a termination fee, so it's worth bearing this in mind.
If you would like more advice on this topic, get in touch with our friendly team.
Can you modify a car on HP finance?
You will only be able to modify the vehicle once you have paid it off in full, at the end of your Hire Purchase contract. While the agreement is running you are not the legal owner of the car, so you shouldn't make any modifications to it.
Once you own the car outright, you can make the modifications you would like.
Can you sell a car on Hire Purchase?
With Hire Purchase, you aren't the legal owner of the car until you have made all the payments and paid the Option to Purchase fee. The lender remains the owner of the vehicle up until this point. Therefore, you must wait until you are the legal owner to sell your car.
What is a Hire Purchase agreement?
Hire Purchase is a type of car finance for new and used cars. It involves paying an initial deposit alongside fixed monthly payments for an agreed length of time. At the end of the term, you can pay an Option to Purchase fee to own the vehicle outright.
Hire Purchase is a great finance option if you want to pay for your car in manageable monthly costs that are fixed. It is also ideal if you know you want to own the vehicle at the end of the agreement.
At Bristol Street Motors, we offer a wide range of Hire Purchase deals across our new and used car range. Contact us to see how we can help you find your next car at a great price.
What's the difference between Hire Purchase and personal contract purchase?
With a Hire Purchase contract, you effectively pay monthly to 'hire the vehicle. You only ever own the car once you have made all the payments and have paid the Option to Purchase fee. Hire Purchase is an ideal option if you want to own the car at the end of the agreement.
With personal contract purchase (PCP), you pay monthly towards the predicted depreciation costs of the car. When the agreement comes to an end, you have three options:
- 1. Pay a balloon payment to own the car outright
- 2. Return the car to the lender
- 3. Use any equity in the car towards the deposit of your next vehicle and take out a new plan
The most common option is to exchange the car for a new one, taking out a new agreement. PCP may be a more suitable finance option if you would like to drive a new car every few years.
What's the difference between Hire Purchase and personal contract hire?
With Hire Purchase, you pay a deposit and monthly instalments to effectively 'hire' the car until you own it. Once you have made all the payments and paid an Option to Purchase fee, you will own the vehicle.
With personal contract hire, you pay monthly to effectively 'lease' the vehicle, but you must return the car at the end of the agreement. This finance type is ideal if you want to drive a new car but know you don't want to own it at the end of the contract.