Year on year, UK new car sales have risen steadily since 2012, with used car sales recently  hitting a 10-year high. It’s good to know that the automobile market is doing well, but one can’t help but wonder how these purchases are funded  in our ever-changing economic environment.  

The answer is finance. These days, very few of us use cash when buying a car, choosing instead to use some kind of credit facility. And while PCP (Personal Contract Purchase) currently seems to be the forerunner in finance options, there’s still plenty to be said about the advantages of the tried and tested Hire Purchase (HP) agreement as an easy and convenient method of obtaining the funds to secure your desired motor.

Exactly What It Says On The Tin

Hire Purchase does just that - providing the facility to hire your chosen car by parting with a regular payment until such time as you have paid off the vehicle’s value, along with interest and fees. The contract often requires a deposit of around 10%, but can then be tailored to fit any budget by altering the duration of the agreement. At the end of the term, the buyer owns the car outright.

Painless Paying

Compared to a traditional car loan, HP is quick and easy to arrange with the help of most car dealers. In fact, in many cases, payment can be arranged and the car driven away the same day. Since the loan is secured on the car itself, no other security (such as a home) is required. The longer the term, the lower the monthly payments, so you can pretty much figure out what you can afford and choose a car accordingly.

Possibly the greatest advantage of HP over using a personal loan or cash to buy a car is that the finance company will also have a stake in your agreement with the car dealer, giving you more weight in any dispute.  

And If You Still Aren’t Sure

Once a number of payments have been completed, if you find that HP is not for you, there is always the option to return the car without penalty. Unlike a loan, which must be paid out in full, this might very well prevent you getting into serious financial difficulties, or help you avoid being stuck with a car that has depreciated to a value less than the remaining contract.

So, What’s The Catch?

While you are able to choose the length of your contract, interest will be charged throughout the whole period so the longer it runs, the more you will pay in total. For example, paying a small monthly amount over 5 years will mean surrendering more cash for your vehicle than if you paid larger installments over a period of 3 years.

Remember too that because the car won’t belong to you until the final payment is made, there will be no possibility of selling or modifying it, unless you pay a settlement fee equal to the amount remaining on the contract.

What do you think? Could Hire Purchase be for you? For a fast and easy way to get the car you want, ask Motor Range about HP today.