Hire Purchase (HP) finance

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Representative 15.7% APR

What is Hire Purchase?

Hire Purchase – or HP – is a type of car finance that lets you spread the cost of a car over an agreed length of time, typically 2 to 5 years. Over that time you’ll make regular fixed monthly payments, including interest to pay off the loan amount.

The key features of Hire Purchase are:


Fixed contract length, usually between 2 and 5 years


Split the cost of a car into fixed monthly repayments

Money Bag Pounds

No deposit options available and no mileage restrictions


Once your payments are made, you’ll be the car’s legal owner

How does Hire Purchase work?

A Hire Purchase agreement gives you the option to put down a deposit and then repay the remaining balance back in regular monthly instalments. It’s as easy as 1, 2, 3, Doh-Re-Mi, A, B, C, you get the gist.

How hire purchase (HP) car finance works


What are the pros and cons of HP finance?


  • No annual mileage limits: You can drive as much as you like without mileage restrictions.
  • Tailored payments: Choose a repayment term that works for you between 2 and 5 years, though be aware of increased interest for longer terms.
  • Low upfront cost: Start with a low or no deposit, making it easier to get started.
  • Predictable payments: Lock in a fixed interest rate for the entire term, giving you complete control over your monthly expenses.
  • Accessible option: Even with a not-so-perfect credit score, hire purchase can be easier to secure than unsecured loans thanks to the car acting as collateral.
  • Own the car outright: You become the car's owner once you complete all payments

Things to consider

  • Not your wheels yet: You won’t own the car until you’ve made all the repayments.
  • Modifications on hold: You can’t sell or modify the car during the loan term.
  • Paying a bit more: Your monthly payments can be higher than other types of finance.
  • Repossession risk: If you don’t keep up your repayments, the car could be taken back by the lender.

Out with the old. Drive in with the new. 🚘


Get a budget in 60 seconds

In a few questions, find out how much you can spend on your car

Step 2

Buy your car from anywhere

Pay swiftly online with your card, or by bank transfer at the showroom

Step 3

Hit the road and pay monthly

Take full control of your account in the Carmoola app

We offer hire purchase loans between £2k-40k for used cars.
Finance is subject to status and is only available to UK residents aged 18 and over.


Representative 15.7% APR

How does HP finance compare to PCP and Personal Loans?


Hire Purchase (HP)

Personal Contract Purchase (PCP)

Personal Loan

No deposit required

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Car is yours at the end of the agreement

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Fixed monthly payments

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No (final) balloon payment

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No excess mileage charges

No mileage restrictions, so you
can drive freely without incurring 
additional fees.

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Secured against
the vehicle

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Available on Carmoola

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This table outlines features of typical agreements and may not apply to all agreement options. Speak to the lender to understand the specific details of the agreements they provide.

What do I need to apply for a Hire Purchase agreement?

To get started with Carmoola, all you’ll need is our app and a full driving licence. We’ll ask you to share a few personal details, so we can check your eligibility – this will involve a soft credit check but don’t worry, it won’t affect your credit score. We only carry out a full credit check after you've signed your agreements and are ready to buy the car.

What happens at the end of my Hire Purchase agreement?

Congratulations! Once you reach the end of your HP finance agreement, and have paid a small Option to Purchase fee of £1, you’ll be the car’s legal owner. Now, you can keep the car, sell it, modify it, or trade it in for a new one – it’s completely up to you.


Am I eligible for car finance?

Answer a few questions to find out if you qualify for a Carmoola loan.

Rates from as low as 6.9% APR,
Representative 15.7% APR


FAQs about Hire Purchase

Here are the most frequently asked questions about how Hire Purchase works. Got more questions? Head over to our FAQs page 👍

What details do I need to apply for Hire Purchase finance?

To get started, all you’ll need is to fill in a short form or complete a few questions using our handy app.

We’ll ask you to share a few personal details so we can check your eligibility – this will involve a soft credit check but don’t worry, it won’t affect your credit score.
We’ll need you to tell us:

  • Your full name
  • Your date of birth
  • Your current address and how long you’ve lived there
  • Your employment status
  • Your income before tax

How much you’d like to borrow
To take things to the next step and complete your application, we’ll also need a few documents:

  • Proof of ID – this can be a passport or full UK driving licence
  • Proof of address – such as a Council tax statement or utility bills
  • Proof of income – such as payslips or bank statements

Can I pay off HP finance early?

To pay off HP finance early, you’ll need to get a settlement figure. You can ask the lender for this at any time. They’ll give you a figure that represents the amount you’ll need to pay to end the loan early, which usually includes the remaining payments minus any interest you’ll no longer need to pay. An early settlement charge might also apply.
Once you’ve settled up, you’ll become the car’s official owner.

Do you own the car after HP finance?

When you reach the end of your HP finance agreement, you’ll typically need to pay an Option to Purchase fee. This is a small amount that covers the admin costs associated with transferring car ownership over to you.
Once all your monthly payments and this final fee have been paid, you’ll be the car’s legal owner.

What happens if you have an accident on HP finance?

Accidents come in all shapes and sizes. If you’ve just scratched the bumper or scraped your car's paintwork, you’ll be responsible for paying for it being repaired at your local mechanic.
If your accident was more serious and you ended up with a write-off, what happens next depends on your insurance. You should receive a payment that reflects the current value of the car, and you can use this to pay the finance company and settle the outstanding finance. The insurance payment might cover the full amount or leave a shortfall and you’ll need to pay the difference either outright or with a new loan.

Does applying for HP finance affect your credit score?

When you apply for HP finance and get past the initial eligibility stage, the lender will likely run a hard credit check to make sure the loan is the right fit for you.
This check will be visible on your credit report, and it could negatively impact your score if you have too many hard searches in a short time.
Once the finance is approved, your credit score will dip because you’re increasing the amount of debt you have. The good news is that this should only be temporary; once you start making payments, your credit score will recover. However, if you fall behind with payments, your credit score might be damaged.

Can I sell a Hire Purchase car?

You won’t become the car’s owner in an HP deal until your loan term ends and you’ve paid the Option to Purchase fee.
This means you can’t sell the car midway through your agreement – put simply, it’s not yours to sell!
If you do want to change cars early, you’ll need to settle your finance first before you can put the car up for sale or offer it as a part-exchange.

What if I can’t afford my Hire Purchase payments?

If you’re struggling with your finances and falling behind with your Hire Purchase payments, you could be at risk of having the car repossessed. Your credit score could also take a hit if you make a late payment or miss it completely.   
It’s best to speak to the lender before you get to this point as they may be able to adjust the terms of your loan to help you get back on track. You might also qualify for a refinance loan with a longer loan term that could reduce your monthly repayment amount (although you’ll likely pay back more in interest overall).


Car finance guides

Hire Purchase vs leasing: Which is better?

If you’re in the market for car finance, you’ll probably have heard about Hire Purchase – or HP for short – and leasing. They’re two of the most...

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HP vs PCP: Which is right for me?

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Rates from as low as 6.9% APR, Representative 15.7% APR

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