Should I Buy a Car on a Hire Purchase Agreement?

Buying a car involves making some decisions, and figuring out how to pay for it is often one of the biggest.

You may have heard about buying a car through a Hire Purchase Agreement and wondered if it’s the right option for you.

In today’s blog, we’re breaking down what a Hire Purchase Agreement is, how it works, and the pros and cons to consider.

Jade also explains more in her video… 👇











What is the Meant by Hire Purchase Agreement?

A Hire Purchase Agreement is a popular way to buy a car, where you essentially "hire" the vehicle until you’ve paid enough to "purchase" it.

It is a contract with a car finance company that provides an affordable way to own a new or used car.

Here’s how it works:

You put down an initial deposit, and then make fixed monthly payments over an agreed period. The car is yours to use during this time, but it’s not officially yours until the last payment is made.

This method is popular because it’s straightforward and manageable.

The monthly payments are fixed, so it’s easy to budget. Also, since the repayment period and interest rate are set from the start, there are no surprises down the line.

However, it’s worth noting that until you’ve made that final payment, the car isn’t technically yours. That means the lender could take it back if you stop making payments.

Once you’ve made all the payments, the car is all yours, with no more to pay!

It’s a handy option for those wanting a clear and structured way to own a car.

How Much Should I Spend on a Car Hire Purchase?

Figuring out how much to spend on a car hire purchase can feel like a balancing act.

You don’t want to end up with eye-watering monthly payments, but you also don’t want to miss out on getting a car that suits your needs.

Firstly, take a good look at your budget. Consider your regular income, your monthly expenses, and how much you can comfortably set aside for your car payments.

Remember, it’s always a good idea to have a bit of wiggle room for unexpected expenses or changes in your financial situation.

Next, think about your car needs. Are you looking for something compact and fuel-efficient for city driving, or do you need a larger vehicle?

Your car choice will impact the overall cost and your monthly payments. It’s important to find a balance between what you need and what you can afford.

Finally, don’t forget to factor in additional costs like insurance, maintenance, and fuel. These can add up, so it’s crucial to include them in your budgeting.

By taking the time to consider your budget, needs, and additional costs, you can determine a spending amount that’s just right for you.

Can You Transfer a Hire Purchase Agreement?

Transferring a Hire Purchase agreement to another person isn’t something you can do.

When you enter a Hire Purchase contract, the deal is set between you and the lender.

Your circumstances and credit rating will be different to those of somebody else, so you can’t simply switch the finance over.

The agreements are designed to be clear-cut and straightforward, keeping the responsibility with the original borrower from start to finish.

If you find yourself in a pickle and struggling with payments, reach out to the lender. They’re the ones who can discuss your options and help you figure out the best way forward.

If you want to sell the vehicle, you can settle the car finance early, then the new owner can apply for a new agreement.

Remember, while the idea of transferring the agreement may seem convenient, understanding the rules and sticking to them is key to a smooth car-buying journey!

Cancelling Hire Purchase Agreement

There is an option called voluntary termination where you can end the car finance agreement early.

However, you should have paid at least 50% of the total repayment amount if you want to proceed with this. 

If you haven’t yet paid off half of the total amount, you have the option to pay a lump sum to reach that midway point.

Just remember to make sure the car is still in good condition and hasn’t taken a beating beyond the usual wear and tear. If it has, you may face extra charges.

To kickstart the cancellation process, it’s best to reach out to the car finance company in writing.

Pen a formal letter explaining your situation and let them know you need to end the agreement early.

It might feel a bit formal, but it’s the best way to keep things clear and above board.

Also, don’t forget to keep copies of all your letters – it’s always good to have a paper trail for reference.

Remember, while cancelling might feel daunting, understanding the steps and following the rules makes it a whole lot easier.


Choosing a Hire Purchase agreement to finance your car can be a budget-friendly way to get a new set of wheels.

However, before diving into any big financial commitments like this one, take a good hard look at your budget.

Make sure you’re confident about handling those monthly payments on time, every time, and pay attention to the length of the contract.

If you want to know how much your car finance will cost, try our car finance calculator to get an estimate.

For questions about car financing with Carmoola, feel free to reach out to us. We’re more than happy to chat! 😀🚘

Read more about buying a car with a hire purchase agreement:


FAQs About Buying a Car on a Hire Purchase Agreement:

Is getting a car on HP a good idea?

It can be, especially if you want to spread the cost over time. Remember to consider your financial situation and the terms of the agreement.

Is it better to get a car outright or hire purchase?

Whether you should buy outright or take out a HP deal depends on your financial circumstances and preferences. Buying outright avoids interest, but HP can be more manageable for your budget.

What are the disadvantages of a hire purchase agreement?

The disadvantages of hire purchase agreements include potentially higher overall costs and the risk of losing the car if you can’t keep up with payments.