HP Car finance renewal guide: when & how to switch

Switch HP car finance with confidence in the UK

A quick, credible route to your next car deal

Switching or ending Hire Purchase can be straightforward if you know the rules. This guide explains when you legally own the car, how to end early, what to expect on fees, and how to compare better offers before your term finishes.

Clarity on ownership and timing is the difference between paying extra and moving on smoothly.

Who benefits from this guide

If your HP agreement ends within the next six months, you want to upgrade sooner, or you are feeling the squeeze on monthly payments, this is for you. UK consumers comparing HP and PCP at renewal will also find actionable steps to maximise bargaining power and protect their credit profile.

The essentials, explained simply

Understanding how HP works helps you avoid pitfalls.

• Ownership: With HP, the finance company owns the car until every instalment and the small option to purchase fee are paid. Only then does the car become yours.
• Legal end point: You cannot legally sell or transfer the car before ownership passes. The option to purchase fee is typically around £100 and appears in your agreement.
• Early exit routes: You can request a settlement figure to clear the agreement early. Alternatively, UK law allows voluntary termination once you have paid at least 50% of the total amount payable, including interest and fees.
• Timing prompts: Lenders often contact you one to six months before the end of the term. This is the best window to compare deals, secure pre-approval, or consider upgrade offers.
• Credit impact: Ending correctly, settling early, or voluntary termination should not harm your credit score. Missed payments and repossession will.
• Oversight: Car finance in the UK is regulated by the FCA. Complaint routes and redress exist if you are mis-sold or treated unfairly.

The more prepared you are, the stronger your negotiating position will be.

Your practical choices at renewal or earlier

1) See your HP through to ownership

• Pay all remaining instalments plus the option to purchase fee to take legal ownership. Suitable if the car suits your needs and running costs are predictable.

2) Settle early using a settlement figure

• Request a written settlement figure from your lender. It deducts future interest from the remaining balance. Factor in any early settlement fee. This can free you to change car or lender sooner.

3) Voluntarily terminate at the 50% threshold

• If you have paid at least half of the total amount payable, you can return the car and end the agreement. No further payments required, but you must take reasonable care of the vehicle to avoid damage charges.

4) Refinance to reduce monthly cost

• If you want to keep the car, refinancing may lower payments by extending the term. Total interest typically increases, so compare the true cost.

5) Switch to a new HP or consider PCP

• Dealers often queue upgrade offers close to renewal. Compare nationwide, not just locally, and consider PCP if you value lower monthly payments and end-of-term flexibility.

What it may cost and the risks to watch

• Option to purchase fee: usually around £100, payable at the end to transfer ownership.
• Early settlement fee: commonly a small percentage of the remaining balance. It typically reduces later in the term. Always confirm in writing.
• Depreciation and equity: In HP, equity builds steadily. Ending early can crystallise a shortfall if market value is below settlement.
• Condition charges: Voluntary termination requires reasonable care. Excess damage may be billed.
• Credit profile: Correctly executed settlement or termination should be neutral. Missed payments, defaults, or repossession harm your score and future borrowing costs.
• Switching costs: New arrangement fees, higher APRs at independent dealers, and add-on products can negate headline incentives.

Compare total cost to the day you hand back keys or take ownership - not just the monthly payment.

Who typically qualifies and when

• Current HP borrowers in Great Britain with agreements regulated by the FCA.
• For voluntary termination, you must have paid at least 50% of the total amount payable shown in your agreement. This includes interest and applicable fees.
• For early settlement, lenders will calculate the balance minus future interest, plus any settlement fee. Eligibility is standard, but fees and processes vary by lender.
• Refinancing depends on lender policy, your credit standing, and the vehicle’s age and mileage.
• Upgrade deals are often strongest 1 to 6 months before the end of term, especially at franchised dealerships keen to place you in a new car.

Step-by-step to a smooth switch

1. Check your agreement for fees, totals, and dates.
2. Request a written settlement figure from your lender.
3. Confirm if you have crossed the 50% VT threshold.
4. Get pre-approval quotes from multiple lenders.
5. Compare HP vs PCP by total cost, not monthly.
6. Negotiate incentives with dealers before visiting.
7. Inspect and prepare the car to avoid condition charges.
8. Finalise paperwork and settle or terminate correctly.

Pros, cons, and the nuance

• Pros: Clear path to ownership, predictable structure, strong negotiating power near term-end, legal VT safety net, potential dealer incentives, and neutral credit impact if handled correctly.
• Cons: Higher monthly payments than PCP, possible early settlement fee, potential negative equity if ending early, and risk of damage charges on VT.
• Considerations: Your mileage, maintenance, insurance, and changing needs. If affordability is tight, act early to avoid missed payments and protect your credit.

Red flags and details worth checking

• Settlement figures: Confirm validity date and whether interest is frozen after payment.
• Fees: Note early settlement, option to purchase, and any admin fees.
• Condition standards: Understand what counts as fair wear and tear before VT.
• Incentives: Ensure deposit contributions or 0% APR are not offset by higher car prices or add-ons.
• Credit impact: Keep all communication in writing and maintain payments until the switch completes.

Alternatives if HP is not the best fit

• PCP: Lower monthly payments with options to buy, return, or upgrade at term end.
• Personal loan: Own the car immediately and potentially secure a fixed, competitive rate.
• Leasing (PCH): Fixed payments with maintenance options, but you never own the car.
• Refinancing existing HP: Keep the car and reduce payments by extending the term.

Quick comparison: dealer types for your next HP

HP vs PCP at renewal

Frequently asked questions

• When do I legally own the car on HP? Ownership transfers only after all payments and the option to purchase fee are paid. Until then, the finance company owns the vehicle.
• Can I end HP early without penalty? You can request a settlement figure that removes future interest, but an early settlement fee may apply. Alternatively, use voluntary termination if you have paid 50%.
• Will voluntary termination harm my credit score? If handled correctly and you meet the 50% threshold, VT should not negatively affect your credit file. Missed payments will.
• What if I cannot afford payments? Contact your lender immediately. Options include restructuring, trading down, refinancing, or VT if eligible. Ignoring the issue risks repossession.
• When should I start shopping for my next deal? Begin 1 to 6 months before your term ends to access upgrade offers and better rates.
• Should I choose HP or PCP next time? HP suits buyers seeking ownership and simplicity. PCP suits those wanting lower payments and end-of-term flexibility.

Ready to act

• Gather your agreement, then request a settlement figure today.
• Compare nationwide HP and PCP offers, including franchised and independent dealers.
• If you are close to term end, leverage dealer incentives before they expire.

The smartest switch starts with written figures and like-for-like comparisons.

Important information

This guide provides general information for GB consumers and does not constitute financial advice. Always check your agreement and speak to your lender before making changes. If you believe you were mis-sold, you can pursue complaints through the FCA routes.