Hire Purchase Explained

What is Hire Purchase?

Hire Purchase (HP) is a hiring agreement between you and the finance company.

The loan is secured against the vehicle over a set period between 1 and 5 years, with fixed monthly repayments including interest.

During or at the end of agreement (if the balance has been paid in full), you have the option to own the vehicle by paying an additional sum called the Option to Purchase Fee, you will then own the title to the car and become the legal owner.

You are the registered keeper of the car and responsible for insuring and maintaining it, but the finance company remains the legal owner until the amount you borrowed has been fully repaid.

Summary

Initial Payment / Deposit: You may be asked to pay an initial payment / deposit.
Fees: There is usually an arrangement fee charged by the lender and any fees can be included as part of the regular repayments.
Restrictions: There are no mileage restrictions under a HP agreement. Lenders may impose certain restrictions on the use and location of the vehicle.
Ending the Agreement: You can make an early repayment to your finance provider before the end of the agreement. At the end of the agreement or once all repayments have been made including the option to purchase fee, title to the vehicle passes to you.

Advantages of Hire Purchase

It's flexible – with terms from 1-5 years (the longer the term, the more interest you’ll pay).
Once you've made all payments including the option to purchase fee, you will own the car.
HP can be easier to get than a standard, unsecured loan for people with poor credit histories (as the loan is secured against the car).

Disadvantages of Hire Purchase

Monthly payments are higher than for Personal Contract Purchase and Leasing deals.
You don't own the car until you make the final payment.
You cannot sell or modify the car over the contract term without the finance company's permission.
If you fail to keep up all your payments, the finance company can repossess the car.

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Jigsaw Finance Limited is a credit broker and not a lender. We can introduce you to a limited number of lenders and their finance products. We are not an independent financial advisor; we will provide details of products available, but no advice or recommendation will be made. You must decide whether the finance product is right for you.

We will receive a commission payment from the lender/finance provider if you decide to enter into an agreement with them. The commission payment received is for the introduction and work in facilitating and arranging the finance for you and is a one-off payment from the lender to Jigsaw. The calculation of this commission is based either on a fixed fee or a percentage of the amount you borrow, this is determined and may vary by the commercial agreement Jigsaw has with the lender. We may work with just one lender or a limited selection of lenders when arranging finance. As a Credit Broker, we may also have other commercial arrangements with a lender which do not influence the terms of your finance agreement. We may share some of this commission with the motor retailer.

The amount of commission will be made available to you before signing your finance documents.

All the lenders that we work with pay commissions at different rates, however, the commission received does not affect the amount you will pay under your finance agreement. Our aim is to secure finance for you at the lowest interest rate available from our panel of lenders. Finance may be available from other providers outside of our panel, and you should consider your options before entering into an agreement, we are not able to provide impartial recommendation.