There are two options of ending the HP finance deal early, a “voluntary termination” and the 2nd being the “paying off early”.

Voluntary termination – Like with PCP finance, you can return the vehicle back to the finance company without paying anything more if you have covered half or more of the total finance agreement.

Paying off early – If you have a lump sum to invest, you can pay off your vehicles finance and become the owner of the car. Your settlement figure will be the outstanding amount of the loan plus a fee, which can’t be charged if you’re only repaying early £8,000 or less. If you’re repaying more, the fee is capped to the lower between:

• 1% of the amount paid early (or 0.5% if you’ve entered the last 12 months of the loan).
• • The remaining interest.

If the lower of the two is the remaining interest, you won’t have saved any money by paying off the loan early. Like with PCP, once your debt is settled and you’ve effectively bought the car, you can either keep it or resell it, depending on its value and your needs.

Hire Purchase is finance that allows you to buy a car outright without having to pay the whole amount upfront and with no large final payment, you’d be splitting the cost across a deposit and a series of fixed monthly installments.

There are no mileage restrictions or final balloon payments to pay, once all repayments have been made, the vehicle is yours.

Use the HP calculator; enter the amounts to give yourself an idea on what the monthly payments will be but please remember these are only estimates and to be used as a guide only.

We also show the estimate value of the tax saving on the loan amount, for businesses HP finance is the most tax-efficient option when it comes to purchasing of equipment, including cars, vans, trucks, etc.

You can get tax relief on all hire purchases, if you are VAT registered, you can reclaim the VAT at the purchase date, please speak with your accountant or financial adviser for further details.

Hire-Purchase is one of the easiest ways to fund the purchase of a vehicle. In essence you will be spreading the cost of the vehicle over a set period of time. At the end of the set period of time and if you have paid all of the monthly instalments on time and in full then on the payment of the final monthly instalment, you own the car and there is no need to pay any further monies.

Hire-Purchase is essentially a contractual commitment to you owning your own vehicle. You will need to be able to fund a deposit for the vehicle and then commit to a number of set monthly payments ranging from 12 months to 60 months. Once you have paid the final instalment of your monthly payments then the vehicle’s ownership will be transferred to you. A number of finance providers will have a set fee ranging from £100.00 to £150.00 for the administration of documentation to transfer the vehicle to you however this does vary according to the finance provider that is utilised.

Advantages of Hire-Purchase

• It is not necessary to save money for a large payment as there is no balloon payment at the end of the Term.
• The payment term can be agreed at the outset to minimise the amount required to be paid each month.
• There is no maximum amount of mileage that you can do or a financial penalty if you exceed the amount of miles originally estimated at the outset.

Dis-advantages of Hire-Purchase

• Not all financial companies offer Hire-Purchase as an option to purchase your vehicle.
• There is no option to purchase the vehicle at the end of the term – you are committed to purchasing the vehicle at the outset.
• The monthly payments can be higher than other forms of vehicle finance as you are spreading the cost of owning the vehicle at the outset and will not have to pay a large payment at the end of the term to own the vehicle.

After you’ve made all of your payments, you’ll need to pay an option to purchase charge to transfer vehicle ownership to you. Your HP agreement will include this information, as well as the stated cost, which is normally between £100 and £200 – please check the terms and conditions of the contract before agreeing with the advisor, they will be able to inform you of the exact fee that will be paid for the release.

Remember that the finance company still owns the vehicle until you make both your final payment and your option to purchase fee. It is prohibited to sell the car before you have made these two payments.

It’s likely that the finance company with whom you have an HP agreement may allow you to sell their vehicle if the entire amount owed has been paid in full first.

You can return the car to the finance company once you’ve paid off half of the total debt. This is referred to as a “voluntary termination.” You can get out of an HP arrangement sooner thanks to a section in the Consumer Credit Act. To be eligible for this, you must have paid at least half of the total amount owed. You can then terminate your contract and return the vehicle to the credit company.

In a Hire Purchase agreement, this clause can be useful to you if:

• You don’t need a car any longer.
• You must cut your expenses.
• You are unable to make your payments.
• You find a car that costs less than the total number of payments left on your contract plus your option to purchase fee.

If the vehicle is not in good working order when you return it, you will be responsible for any necessary repairs. If you haven’t made half of your payments, you will be obliged to make up the difference before your agreement is terminated.

If you decide to end your contract early, make sure you acquire formal confirmation from the lenders, and save copies as documentation in case you are accused of defaulting.

All lending is subject to status checks and an affordability assessment.