Understand HP car finance in the UK, compare it with PCP, check rates, deposits and protections, and learn the exact steps to secure the right deal for your budget.
Smart paths to HP car finance in the UK
Setting the scene
Hire Purchase lets you spread a car’s cost over 1-5 years with fixed monthly payments. You pay a deposit, then regular instalments, and a small option-to-purchase fee to own the car outright. It is straightforward, predictable and free of mileage limits.
Understanding APR is not just percentages - it is what you will pay in real pounds over time.
Who benefits most
HP suits buyers who want guaranteed ownership, clear budgeting, and no end-of-term surprises. If you drive high mileage, want to keep the car long term, or dislike balloon payments, HP fits. PCP can suit lower monthly budgets or those who like to swap cars frequently.
Key terms made simple
The essentials you will see on every HP quote
- Deposit: Commonly around 10% of the car price. Some lenders offer no-deposit for strong credit.
- Term length: Usually 12-60 months. Longer terms cut monthly cost but increase total interest.
- APR: Typical 2025 HP APRs run about 10.9% to 19.9%. A few 0% promotions exist on selected models.
- Monthly payment: Fixed across the term. Higher than PCP because there is no balloon.
- Option-to-purchase fee: A small final fee that transfers legal ownership to you.
- Mileage: No mileage limits on HP.
- Early settlement: You can repay early. Interest may reduce based on the lender’s settlement calculation.
- Withdrawal right: 14 days to change your mind on regulated agreements.
- Total amount payable: Deposit plus all payments, fees and interest. This is the figure to compare.
Fixed payments, no mileage limits, ownership at the end - that is HP in a nutshell.
Choosing between HP and PCP
What changes in practice
| Feature | HP | PCP |
|---|---|---|
| Ownership at end | Yes after final fee | Only if you pay the balloon |
| Monthly cost | Higher | Lower |
| Final payment | Small fee | Large balloon |
| Mileage limits | None | Usually applies |
| End-of-term choices | Keep the car | Return, exchange, or buy |
| Predictability | High | Medium |
- Pick HP if you value ownership and certainty.
- Pick PCP if you prioritise lower monthly payments and flexibility at the end.
What it could cost you
Rates, deposits and the bottom line
- APR in 2025 is typically 10.9% to 19.9%. Your credit score, deposit size and car value drive the rate.
- Deposit around 10% is common. A larger deposit reduces monthly cost and total interest.
- 0% APR offers sometimes appear on new or selected used cars during promotions. Choice may be limited and criteria stricter.
Always compare the total amount payable, not just the monthly figure.
Risks to watch:
- Longer terms lower monthly payments but can raise total interest paid.
- Used cars may carry higher APR than new.
- Optional add-ons can inflate cost if not needed.
Can you qualify
How lenders view your application
- Credit profile: Stronger credit usually secures lower APR. HP can be accessible to fair credit, but rates may be higher.
- Affordability: Lenders assess income, outgoings and existing credit commitments.
- Vehicle: Car age and value matter. Many lenders finance both new and used within set criteria.
- Deposit: Bigger deposits strengthen applications and reduce risk.
- Employment stability: Regular income and stable employment can help.
Positive credit impact: Making payments on time can improve your profile over time.
From quote to keys - step by step
The process in brief
- Set a realistic budget and desired term.
- Check your credit report for accuracy.
- Compare APRs and total payable across lenders.
- Decide deposit amount and optional extras.
- Get a soft-search pre-approval if available.
- Review the agreement and fees carefully.
- Sign, pay the deposit and arrange collection.
- Keep payments on time and retain documents.
Advantages and trade-offs
Weighing HP on its merits
Pros:
- Guaranteed ownership after final fee
- No mileage limits - ideal for heavy drivers
- Fixed payments for predictable budgeting
- Available on new and used cars
- Early settlement and 14-day withdrawal rights
Cons:
- Higher monthly payments than PCP
- Total interest can be higher on long terms
- Less end-of-term flexibility than PCP
Due diligence before you apply
Avoiding common pitfalls
- Compare at least three quotes on APR and total payable.
- Scrutinise fees: option-to-purchase, admin, and potential late charges.
- Confirm early settlement terms and any rebate method.
- Check car condition and warranty - finance firms share liability for issues under UK law.
- Beware of inflated add-ons. Only select cover you truly need.
If a deal looks unusually cheap, check the term, final fee and included extras.
Considering other routes
Alternatives that might fit better
- PCP: Lower monthly cost with flexibility to return or upgrade, but mileage limits and a balloon apply.
- Personal loan: Unsecured loan where you own the car from day one. Rates depend on credit. No dealer restrictions.
- Leasing (PCH): Fixed rental for use only. No ownership, mileage limits apply. Often lower monthly outlay.
- Cash purchase: No finance costs if funds are available. Opportunity cost applies.
Quick answers to common questions
FAQs
-
Can I get HP with poor credit?
Potentially yes, but expect higher APR. A larger deposit can help approval and lower cost. -
Are 0% APR HP deals real?
Yes, but typically on selected models and during promotions. Eligibility is tighter and stock is limited. -
What happens if I exceed mileage?
HP has no mileage limits, so there are no mileage penalties. -
Can I settle early without penalties?
You can settle early. Interest savings depend on the lender’s calculation. Ask for a settlement figure. -
Is HP available on used cars?
Yes. Terms are similar to new, though APR can be higher. -
What fees should I expect?
Common fees include an option-to-purchase fee and possible admin charges. Always check the agreement.
Your next moves
- Set your budget and preferred term using an online calculator.
- Gather quotes from your bank, a broker and a dealer.
- Shortlist two HP offers and compare total payable and fees.
- Book a test drive and request a full breakdown in writing.
Aim for the lowest total payable that still fits your monthly budget.
Important information
This guide provides general information for GB consumers and is not financial advice. Always assess affordability and read your agreement carefully. Consumer rights include 14-day withdrawal and early settlement on regulated HP agreements.
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