Do You Own The Car at the End of a Hire Purchase Agreement?

Do you own the car after Hire Purchase? At what point do you own a car on HP car finance? 🤔 Since you’ve already been paying for it through the initial deposit and monthly payments, does that make you a partial owner of the vehicle? You may have plenty of questions in mind about what you can and cannot do with a financed car. We’ll help you out!

Are You the Legal Owner of Car on Hire Purchase?

Are you wondering, "now I am buying a car on hire purchase, do I own the car?" The way that Hire Purchase car finance works is that you get to buy a car through a series of affordable payments. Typically, your payments consist of the initial deposit at the start of the car finance agreement, the monthly repayments, and sometimes, even a balloon payment if you opted for a Hire Purchase deal that comes with one. 

During this time that you’re still paying for the car, the legal owner with hire purchase is the car finance company. They’re the ones who bought the car for you and then you agreed to pay them back within a certain period. But even if you’re still completing the repayments, you’re allowed to use the car. 

What’s great about HP car finance is it doesn’t come with mileage limits like PCP or car leasing. You don’t have to worry about exceeding the allowable mileage limit if you want to go on a long road trip. There are also no excess mileage charges to think about like with other types of car finance products.  

So, are you the legal owner of a car on hire purchase? No, not yet. Until the ownership of the car has been transferred to you by the car finance company, they are the legal owner of the vehicle you’re driving. And you usually have to pay a small fee at the end of the contract to complete the transfer - Carmoola for example charges just £1, other companies may charge more. 

Can I Modify a Car on HP Car Finance?

When you finance a car, you can drive it immediately once you pay the initial deposit. Some car finance companies even offer no-deposit deals to drivers with excellent credit scores. This means they don’t have to put down any cash at all to drive the car home. 

But since you’re the one using the car, is it possible to make changes to it? Generally, no, you cannot modify the car on Hire Purchase. You might be thinking of upgrading some features or parts, adding better tech, repainting, or customising the car. For all these things, it’s not possible to make changes on a financed car. 

You may add a smartphone holder, seat covers, and other accessories that can easily be removed. However, if you plan on making permanent changes that will be difficult or impossible to undo, you might face penalty charges from the car finance company. 

The reason for this is that the lender has calculated the car’s value and how much of this value will be lost over time. They have a predicted figure in mind and this is based on the car’s original, unmodified state and some fair wear and tear during the course of your car finance agreement. If you modify a financed car, even if you think the upgrades will increase its value, it will be troublesome for the lender to calculate it considering the changes.

Bear in mind that the car finance company should still be able to resell the car in case they have to repossess it in the event of the borrower defaulting on the loan. A modified car will be much more difficult to sell because it won’t easily fit the preferences of the majority of car buyers. 

Can I Sell a Financed Car?

Selling a financed car would be breaking the agreement you have with the car finance company. Firstly, since you are not the legal owner of the vehicle, you do not yet have the legal right to sell it. Second, you need to have paid the last instalment on your Hire Purchase deal with the lender before the car will be yours. And lastly, selling a car on HP car finance will not only violate your contract with the lender but is also against the law since the vehicle is not yours to sell. 

Do You Own the Car After Hire Purchase?

Once you’ve made all the payments on the car plus maybe a small administration fee to process the paperwork on transferring the ownership of the vehicle to you, then you will be the legal owner of the car. At this point, you’re now free to modify the vehicle, customise it to your liking, repaint it or add more features as you wish. You may even put it on the market if you’d rather have a brand new car again!

Takeaway

It’s important to understand what you’re allowed and not allowed to do while you’re still paying for a car on Hire Purchase. This way, you won’t be surprised if the car finance company charges you with penalties because you broke your agreement with them. Be sure to read and understand your car finance agreement before placing your signature on the dotted line.... 👍