Hire Purchase (HP) Explained
Please read this carefully as it provides a summary of the key points of an HP agreement. It does not show all the benefits or exclusions – please speak to an experienced member of our team if you have any queries about whether this product is suitable for you.
Hire Purchase (HP) - Suitability explanation
Hire purchase is a simple repayment facility where you own the van at the end of your agreement. You pay a deposit, which is the minimum VAT price of the van, and then pay the remainder of the balance monthly over an agreed period (up to 60 months).
Benefits of Hire Purchase (HP)
- Flexibility in your repayments makes for easy budgeting
- VAT deposit is reclaimable for VAT registered businesses
- You own the vehicle once your final instalment has been paid
- No mileage restrictions
- No VAT on fixed monthly payments
- Fixed or variable interest options
- 100% of interest charges can be offset against taxable profits
- The van is an asset on your balance sheet
- You don’t own the car until you’ve made your final payment, which means if you get into financial difficulties the finance company could take it away.
- Your deposit and term length will affect your monthly payments. Your monthly payments are likely to be higher the smaller the deposit is and the shorter the term of the loan.
- Dedicated funding product, which does not include maintenance or any other value-added services
- Until you’ve paid a third of the total amount payable the lender can repossess the car without a court order.
Disadvantages of Hire Purchase (HP)
Hire purchase is a flexible product and it is possible to put down a larger initial payment, which has the advantage of reducing the monthly payments. This contract is only for those who are absolutely sure that they want to take ownership of the vehicle at the end of the contractual period.
Taking care of the vehicle
- You must ensure the vehicle is comprehensively insured at all times
- It is a condition of the Manufacturer’s warranty that the vehicle is serviced and maintained in accordance with the manufacturer’s requirements. They recommended that you use the services of a main franchised dealer