HP Car finance: do you really need it?

A smarter way to decide on HP in 2025

Hire Purchase remains a staple for used cars in Great Britain, giving straightforward ownership with no mileage limits. With finance volumes steady and values rising, choosing the right product matters. Here is how HP stacks up, what it costs, and when it fits your plan.

Who will benefit from this guide

If you want to own your car outright and prefer predictable payments, HP may be for you. UK buyers comparing HP with PCP, leasing or subscriptions will find clear pros and cons, typical rates, and practical checks to avoid costly mistakes.

Key terms made simple

• Hire Purchase (HP): You pay a deposit, then fixed monthly payments over 1 to 5 years. When the last payment is made, you own the car. No mileage limits.
• Personal Contract Purchase (PCP): Lower monthly payments with a large optional final payment if you want to keep the car. Mileage limits usually apply and excess charges can occur.
• APR: The annual percentage rate that captures interest and certain charges. In 2025, strong credit may see around 4.9 to 6.9 percent. Weaker credit may face 15.0 to 29.9 percent.
• Deposit: Often 10 percent or more for HP, though it varies by lender and credit profile.
• Equity: In HP you build ownership as you pay. With PCP, equity depends on the car’s value versus the guaranteed future value or settlement.
• Early settlement: Paying off the agreement before term. Ask for a settlement figure and check fees.
• Point-of-sale finance: Arranged at the dealership. Over 80 percent of private new car sales in the UK use dealer-arranged finance, with used car finance also significant.

Understanding APR is not only about percentages - it is about the pounds you pay over the term.

Your finance menu in today’s market

The UK motor finance market was near £39 billion in 2024, with lenders innovating for flexibility and transparency. PCP dominates new cars, while HP remains popular for used purchases. Leasing and subscriptions add further choice. Here is how these options compare in practice.

Quick comparison

Flexible products are reshaping how Britons fund cars in 2025. Dealers, brokers and digital-first lenders use tools like Open Banking to speed checks and improve transparency.

What it really costs - and why rates matter

Interest rates drive affordability. In 2025, good APRs for strong credit often sit around 4.9 to 6.9 percent, while weaker credit can see 15.0 to 29.9 percent. HP usually has higher monthly payments than PCP because there is no large final payment. The upside is clear ownership and no end-of-term choices to juggle.

• Used car finance values rose year on year in July 2025 while volumes stayed steady. Many buyers are spending more per car, so the rate you secure matters even more.
• With HP, total cost equals deposit plus all monthly payments plus any fees. Compare across lenders and check if a dealer incentive masks a higher APR.
• Stabilising rates are improving confidence, but your credit score and deposit still shape the price you pay.

Bold but simple rule: shop around, check eligibility without hard searches where possible, and compare total payable, not just the monthly.

Can you get it - and should you

Lenders assess income, outgoings, credit history and the car’s age and mileage. HP is commonly available on used cars, including higher-mileage or nearly new models, which suits many UK buyers aiming to balance depreciation and affordability.

• Deposit: Expect around 10 percent, though higher deposits can cut total interest.
• Term: Usually 24 to 60 months. Shorter terms raise monthly cost but reduce total interest.
• Vehicle: HP can be available for older cars than PCP, but lender limits vary.
• Credit: Better credit usually means lower APR. Thin files or missed payments tend to push rates higher.

Tip: ask for a personalised, pre-qualification check using soft-search tools before applying. This can indicate likely APR without affecting your credit file.

From browsing to ownership - simple steps

1. Set a clear monthly budget and maximum total payable
2. Check soft-search eligibility with several lenders or brokers
3. Choose the car and confirm deposit and term options
4. Compare total cost, fees and early settlement terms
5. Review mileage needs - no limits with HP
6. Complete ID, affordability and credit checks digitally
7. Sign the agreement and drive away
8. Make payments on time and keep documents safe

Weighing it up - the real trade-offs

HP excels when you value certainty and ownership. There are no mileage clauses and no balloon payment to plan for. The price of that certainty is higher monthly cost and less flexibility if your circumstances change. PCP suits those seeking lower payments and the option to switch more often, while leasing or subscriptions remove ownership entirely in favour of convenience. Your choice should reflect how long you will keep the car, your annual mileage, and your tolerance for future-value risk.

Red flags before you commit

• Do not fixate on the monthly figure - compare total payable including fees.
• Ask about early settlement calculations and any charges.
• Confirm whether optional products are required or genuinely optional.
• Check the car’s age and mileage limits for the lender, especially on older used cars.
• Budget for insurance, servicing, tyres and road tax alongside the repayment.

If you expect major life changes soon, a shorter term or a more flexible product may be safer than a long HP.

Alternatives worth a look

• PCP: Lower monthly cost and multiple end options, but watch mileage caps and potential end charges.
• Leasing: No ownership and usually lower hassle, but you are locked into limits and return standards.
• Subscriptions: Rolling terms with servicing and insurance sometimes included, at a premium monthly price.
• Cash or personal loan: Full control and potential savings if you can secure a competitive unsecured rate.

Quick answers to common questions

• Is HP good for used cars? Often yes. It is widely used for used vehicles in the UK and avoids mileage caps while delivering ownership.
• How big is the UK car finance market? Around £39 billion in 2024, with high point-of-sale penetration on new cars and meaningful financing of used cars.
• What APR is considered good? In 2025, strong credit can see roughly 4.9 to 6.9 percent. Poor credit may face 15.0 to 29.9 percent.
• Will I pay more monthly with HP than PCP? Usually yes, because there is no large final payment at the end.
• Can I settle early? Typically yes. Request a settlement figure and check any fees before paying off.
• Do rates look stable now? After recent hikes, rates are stabilising, though your personal rate depends on credit, deposit and the lender.

Make your next move with confidence

• Use eligibility tools to gauge your likely APR before applying.
• Compare HP and PCP side by side using total payable.
• Factor in running costs alongside repayments.
• If ownership and predictable budgeting matter most, HP can fit. If you prefer flexibility or lower monthly costs, consider PCP or leasing.

Ready to explore tailored options? Check your eligibility, compare offers from UK lenders, and lock in a rate while conditions remain stable.

Important information

This guide is for general information only and is not financial advice. Eligibility, rates and terms depend on your circumstances and the lender. Always read the agreement and consider independent advice if unsure.