Second-hand HP (Hire Purchase finance)

Spread the cost of buying a used car with affordable repayments using second-hand HP finance

BuyaCar team
Jan 11, 2019

If you’re planning to buy a used car on finance, then you’re in good company. More than 1.4 million drivers did just that in the past year to November 2018.

Customers are using finance to afford newer and safer models, with cleaner emissions and more modern technology, figures from the Finance and Leasing Association, the industry body, suggest.

Many of these cars are financed using Hire Purchase (HP), which is available on virtually any car, and results in you owning the vehicle. Alternatively, Personal Contract Purchase (PCP) finance brings lower monthly repayments, and the option to return the car at the end of the agreement.

Scroll down for more information on buying a second-hand car with Hire Purchase, or click below for current deals on used cars.


Hire Purchase finance

Hire Purchase finance splits the cost of a car into equal monthly instalments. Agreements typically last for between two and four years and at the end, you’ll own the vehicle.

Most buyers put down a deposit, although a no-deposit option is often available. The deposit goes towards paying off the car, so it’s not returned. The higher the deposit, the lower your monthly payments will be.

 How HP finance works

1. Deposit & delivery

  • A deposit reduces the amount owed and may be optional

2. Monthly payments

  • Pay for the rest of the car in fixed monthly instalments

3. You own the car

  • Once the final payment is made, the car is yours.


HP finance pros and cons

Good for

✔  Spreading the cost of your car
✔  No mileage restriction
✔  Available for most vehicles
✔  No-deposit option

Not so good for

Cheapest monthly payments
Regular car upgrades
Guarding against large value loss



Hire Purchase or PCP?

Personal Contract Purchase (PCP) finance offers more flexibility and lower monthly payments than HP. That’s because repayments only cover part of the car’s cost, leaving you with the option to return the car or buy it at the end.

It’s made PCP the most popular type of car finance, but it’s not the best option for everyone. We’ve highlighted some of the key differences below.

Monthly payments Monthly payments with PCP finance are lower than with HP because they don’t cover the full cost of the car. This can enable you to buy a newer and more expensive vehicle but will mean that you don’t own the car at the end unless you make a further large payment at the end.


Flexibility Both types of finance usually allow you to adjust your deposit and agreement length, which will increase or decrease your monthly payments, until you find a combination that suits you.

However, PCP is far more flexible at the end of the agreement, with the ability to return the car and walk away or buy it for an additional sum, which can be refinanced.

If the car is worth more than the cost of buying it, then you can trade it in and use the difference towards another vehicle.


Total amount payable
If you take out PCP finance and then return the car at the end, you'll have spent less than paying for a car outright - although you’ll have nothing to show for it.

However, you’ll have paid more in interest costs. HP’s higher monthly instalments mean that you clear your debt more quickly than with PCP, where you continue to owe (and pay interest on) the large final payment until the very end of the agreement.

So if you do want to own your car at the end of the agreement, HP is likely to be a cheaper option.


Car age Both HP and PCP car finance are available for new and used cars.

PCP repayments add up to the amount that a car is expected to lose over the course of the arrangement. You'll then have the option of making he final payment to own the car.

In other words, the instaments amount to the difference between the car’s value at the start and its value at the end. This is calculated by using an estimated future value for the vehicle.

Once a car is more than five years old, it becomes difficult to calculate its future value, so PCP is less common. HP continues to be available for these older cars, though.


Future value guarantee
One major advantage of PCP finance is that it includes a guarantee of your car’s future value.

That’s because its future value is estimated at the start of the agreement and used to calculate your monthly payments. It's even called the “guaranteed minimum future value” (GMFV).

No matter what happens in the used car market, you can return the car at the end of the agreement. If the car is worth less than the GMFV, then the finance company will lose out.

If the car is worth more than the GMFV, you don’t have to forfeit this surplus: by trading the car in or selling it yourself, with the agreement of the lender, you can use the difference towards a new car or pocket it.


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