Hire Purchase
Understanding Hire Purchase (HP)
Hire Purchase (HP) is a widely used method for financing a car or an asset. It lets you spread the cost of the goods over a set period, usually starting with an initial deposit. Here’s how it generally works: First, you choose the goods you want to finance. Then, you’ll typically pay an initial deposit, the amount of which can vary. The remaining balance, along with interest, is then divided into fixed monthly payments over an agreed term, such as 24, 36, 48, 60 months or longer. You’ll make these regular payments to the finance company. It’s important to understand that you don’t own the goods outright until you’ve made all the payments, including any final fee. Throughout the agreement, the finance company legally owns the goods. Once all repayments are complete, and you’ve paid a small “option to purchase” fee, you become the legal owner of the goods.
For guidance on tax implications and to ensure optimal tax efficiency, please consult a qualified tax advisor or accountant. Evogo Asset Finance does not provide tax advisory services.
Features and Benefits of Hire Purchase
HP offers several key features and benefits. You’ll have fixed monthly payments, which makes budgeting straightforward since you know exactly what you’ll pay each month. HP allows you to spread the cost of acquiring goods without having to pay the full amount upfront. Compared to unsecured personal loans, HP can sometimes come with lower interest rates because the loan is secured against the goods itself. A significant benefit is that you will own the goods at the end of the agreement once all payments are complete. Additionally, unlike some other finance options, (HP typically has no mileage restrictions for wheeled goods), giving you more freedom.
Pros and Cons of Hire Purchase
Pros:
- You’ll benefit from predictable monthly costs, making it easier to manage your budget.
- You will eventually own the goods, which can be a significant advantage for many.
- HP is often generally easier to obtain than other loans, as the car goods as security for the loan.
- It’s a versatile option that can be used to finance both new and used cars, assets etc.
Cons:
- A major drawback is that you don’t own the goods until the final payment is made.
- Interest charges can increase the overall cost of the goods compared to buying outright.
- If you miss payments, the goods may be repossessed, leading to the loss of the asset
- Overall, HP can be a potentially higher overall cost than buying with cash.
At Evogo Asset Finance, we believe that securing finance for your next acquisition, regardless of its type or purpose, should be a straightforward and empowering experience. Our process for obtaining specialist finance is meticulously designed to be very simple, safe, personalised, and secure:
Your Finance Options
We want to help you understand the different finance agreements available through Evogo Asset Finance so you can make an informed decision. This guide provides an overview of the features, benefits, and pros and cons of each finance option. We'll also explain the difference between regulated and unregulated agreements.
This information is for your understanding only. It's designed to help you determine which product best suits your needs, but it is not financial advice. Before you sign any agreement, the lender will provide a detailed explanation of the product you have chosen.
