What is Hire Purchase?
Hire Purchase (HP) is a credit agreement used to purchase cars, motorcycles, caravans, motorhomes, and other finance assets.
The finance company will pay the car retailer for your chosen car, less any deposit paid direct to the dealer. The balance, plus interest charges being repaid to the finance company monthly over a fixed term, usually lasts between 12 and 48 months. The monthly repayment is a fixed amount, regardless of what happens to interest rates. The term is fixed, although a customer can pay in full and settle the agreement at any time. In settling early, the customer may benefit from a rebate of interest due over the full term of the agreement. The vehicle is registered to the customer, who also keeps the V5 log book. The finance company will register a financial interest with HPI, which is removed when the final payment is made or the loan is settled in full.
The majority of our customers use HP to purchase their vehicles, with others choosing our Finance Lease option for vans and commercial vehicles.
What is needed from the customer?
As with most finance agreements, a deposit is required. We at Glenside Finance look for an amount appropriate to the individual customer’s circumstances and take into account the vehicle value, age and mileage. A minimum of 5% is usual.
Customers will need a full UK/EU driving licence with no serious convictions. This is also used as proof of identity and current signature.
As a responsible lender we follow a ‘Treating Customers Fairly’ policy, and therefore we must establish that any new loan is appropriate and affordable for our customer. Bank statements may be requested to establish financial stability and affordability.
A certificate of comprehensive insurance will be required.
Advantages of Hire Purchase
- Customers can have a newer, higher specification car than they could/want to buy outright
- The cost of the vehicle is paid by monthly instalments rather than a large upfront investment
- The cost is spread over a period of time and paid by fixed monthly instalments that will not increase – even if bank interest rates rise
- You own the vehicle once your final instalment has been paid, compared to leasing (renting) the vehicle
- There is no VAT to pay on monthly instalments, unlike that on a lease
Disadvantages of Hire Purchase
- The loan is secured against the vehicle: The vehicle can be repossessed if payments are not kept up
- Non-payment can negatively affect your credit rating
- The finance company are the legal owners of the vehicle until the agreement is paid in full
- Repayments will include interest charges, and the car will overall cost more than a cash purchase
- The rate of interest will reflect the level of risk to the lender. Previous poor credit will represent higher risk and a higher rate will be charged
Our speciality is providing car finance to people with poor credit, defaults, CCJs or ex-bankrupts. We provide Hire Purchase for cars and Leasing for vans.
At Glenside Finance, we promise to treat you as an individual and look at your application personally rather than using a computerised credit scoring system. We aim to work with our customers to provide car finance packages which are affordable and straightforward.
If you want to find out more about our options for poor credit car finance then call us on 01942 466 035 to speak to one of our representatives today.