What is HP?
When you are looking into the kind of used cars finance Plymouth-based dealerships offer, you might be confused by the sheer amount of terminology and different options. Here, we are going to explore one of the most popular ways to pay for a car - read on to discover more about HP finance.
What is HP finance?
Hire Purchase (HP) car finance is just one of the many ways that you can spread the cost of buying a car. This loan is specifically set up to help you to purchase a car or van without having to pay a large upfront cost. Unlike a personal loan, HP is only used for vehicles. If you took out a traditional bank loan or personal loan, you may use it to purchase a car outright. HP finance works in such a way that you do not have ownership of the vehicle until all of your repayments have been made - until then you will be hiring it with the intent to purchase.
Do you need a deposit?
You begin your agreement with a deposit, which is traditionally 10% of the overall sticker price of the vehicle. This is deducted from your repayments, meaning that if you pay more than 10%, your repayments will be reduced. You will then pay off your vehicle monthly over an agreed period of time. You may wish to pay it over a single year or over up to seven - it depends on what you can realistically afford per month.
What about early settlement?
If you choose a longer-term repayment and realise that you are able to pay off the remainder of your car earlier, this is possible. You do not need to wait until the end of the term to own the car - you can simply inform your lender and have them give you the amount that you still need to pay.
However, if you wish to trade in your car during your current HP agreement, this can also be possible in some circumstances and can be a good way to upgrade to a better vehicle.
The benefits of HP
The main benefit of HP finance is that you do not need to buy a car outright, so there is no need to save up a large amount of money. You also won’t encounter mileage limits, which do apply to PCP finance, nor will you need to pay a large final payment to own the car. Once all your repayments have been made, you know that the car belongs to you.
The drawbacks of HP
During your repayment term, you do not own your car. This, combined with higher monthly repayments than with other types of finance, can be off-putting for some. You also risk losing your car if you cannot make your repayments.
Is HP finance the right choice for you? This can depend on your lifestyle and how you want to pay for your vehicle - but it can be a fantastic way to get the car you want. To further discuss HP finance and to visit the car store Plymouth motorists get great value from, check out Motor City Plymouth.