HP Car finance cost guide: typical prices & fees in the UK

What you will really pay with HP in 2025

Understanding APR is not just about percentages - it is about the pounds in your pocket. Here is what typical UK buyers pay for Hire Purchase today, and how to keep costs in check.

HP gives you predictable payments and ownership at the end - without mileage limits or a balloon bill.

Who benefits most from HP

HP suits UK drivers who want to own their car outright, prefer fixed payments, and dislike mileage caps. It works well if you keep cars long term or drive high annual miles. If you need the lowest monthly payment and plan to change cars often, you may prefer PCP instead.

Key terms made simple

• APR: The annual percentage rate that captures interest and certain fees. Typical HP rates in 2025 range from about 8.9% to 19.9% depending on lender, credit profile, and car age.
• Deposit: Commonly around 10% of the car price. A larger deposit lowers both monthly payments and total interest. Some lenders offer no-deposit deals for strong applicants.
• Term: Usually 1 to 5 years. Longer terms reduce monthly cost but increase total interest. Shorter terms do the opposite.
• Fixed rate: HP uses fixed interest and equal monthly payments throughout, so budgeting is straightforward.
• Ownership: Pay the deposit and monthly instalments, then a small option-to-purchase fee at the end - you own the car, with no balloon payment.
• Security: The car is the security for the finance. Missed payments risk repossession.
• Early settlement and VT: You can settle early or use voluntary termination once you have paid at least 50% of the total amount payable. Fees or extra interest may apply - always check your contract.

Typical UK snapshot

• APR often sits around 14.9% to 19.9% for average credit and used cars.
• No mileage limits or end-of-term condition charges with HP.
• Total cost is often lower than PCP if you plan to keep the car.

HP or PCP - which fits your plan

PCP can look cheaper monthly because it defers a large chunk of the car value into a final balloon. HP sets higher monthly payments but ends with ownership and no balloon. Choose based on how long you keep cars and whether mileage flexibility matters.

Quick comparison

If you know you will keep the car, HP usually wins on total cost.

What it could cost you

• APR range: Around 8.9% to 19.9% in the UK market for 2025. Newer cars and excellent credit may secure the lower end. Older cars or weaker credit attract higher rates.
• Deposit: Budget ~10% of the purchase price. More upfront usually means less interest overall.
• Fees: Expect a small option-to-purchase fee at the end. Arrangement fees vary by lender - always check the total amount payable.
• Early settlement: Lenders may charge settlement interest or an admin fee. Ask for a settlement figure before committing.

Illustrative outcomes

• Shorter term - higher monthly, lower total interest.
• Longer term - lower monthly, higher total interest.
• Larger deposit - reduces both monthly and total interest.

Use reputable online calculators to model deposit, term and APR combinations before you sign.

Who is likely to be accepted

• Credit profile: HP can be more accessible than unsecured loans because the car is collateral. Bad-credit specialists exist, but rates will be higher. Always weigh total cost.
• Income and affordability: Lenders assess income, outgoings, and credit conduct. Stable employment and clean recent payment history improve your chances.
• Vehicle factors: Newer cars and lower mileage can attract better rates. Very old or high-mileage cars may limit lender choice.
• Deposit strength: A 10% deposit is common. A larger deposit can offset weaker credit and reduce risk.

Aim for a deposit you can afford comfortably - without draining your emergency savings.

From showroom to ownership - the steps

1. Set a realistic budget and target APR range.
2. Check your credit file for errors and improvements.
3. Compare HP quotes across lenders and brokers.
4. Adjust deposit and term to hit affordable monthly payments.
5. Review the total amount payable and all fees.
6. Confirm early settlement and voluntary termination terms.
7. Sign only when the contract matches your agreed figures.
8. Make payments on time and keep insurance current.

Upsides and trade-offs to weigh

Pros

• Ownership at the end with no balloon payment
• Fixed rate and equal monthly instalments for certainty
• No mileage limits or end-of-term condition charges
• Often more accessible for mixed credit profiles

Cons

• Higher monthly payments than PCP for the same car
• Total interest rises with longer terms
• Car can be repossessed if you default
• Early settlement may include fees or extra interest

Checks before you sign

• Compare at least three HP quotes - same deposit and term.
• Focus on total amount payable, not just the monthly figure.
• Ask for all fees upfront - arrangement, option-to-purchase, any admin.
• Verify VT rights and timing - usually after paying 50% of total payable.
• Confirm how arrears, missed payments and late fees are handled.
• Ensure the car is suitable for long-term ownership if that is your plan.

If HP is not the perfect fit

• PCP: Lower monthly cost, mileage limits, and a balloon if you keep the car.
• Personal loan: Unsecured, may suit excellent credit and older cars, but rates vary and there is no security on the car.
• Leasing (PCH): Pure use without ownership, mileage limits apply, return condition rules and fees likely.
• Cash purchase: No interest, but check the impact on savings and emergency funds.

Common questions answered

• What APR should I expect in 2025? Typical HP APRs range from about 8.9% to 19.9% depending on credit, lender and car age. Many representative examples sit around 14.9% to 19.9% for average credit and used cars.

• How much deposit do I need? Around 10% is common. Larger deposits cut monthly payments and total interest. Some lenders offer no-deposit HP to strong applicants.

• Is HP cheaper than PCP overall? If you keep the car, HP often works out cheaper because there is no balloon payment. PCP can look cheaper monthly but may cost more long term.

• Are there mileage limits with HP? No. HP has no mileage caps and no excess mileage charges. This is helpful for high-mileage drivers.

• Can I end the agreement early? Yes. You can request early settlement or use voluntary termination once you have paid at least 50% of the total amount payable. Fees or extra interest may apply.

• Does HP help if my credit is not perfect? Often yes. The car is security for the finance, so some lenders consider broader credit profiles. Expect higher rates - always compare total cost.

Your next move with switcha

• Set your budget and deposit target.
• Check your credit file and tidy any quick fixes.
• Compare HP quotes across UK lenders on APR, total payable and fees.
• Use calculators to test terms from 1 to 5 years.
• Shortlist two deals, then negotiate with the seller on price to reduce financing needs.

Ready to compare HP deals? Start with APR, then confirm the total amount payable and fees before you sign.

Important information

This guide is for UK general information only and is not personalised financial advice. Rates, eligibility and fees vary by lender and your circumstances. Check the full pre-contract information and consider independent advice if needed.