UK finance jargon - in plain English
A hire purchase deal where you own the car at the end.
Hire Purchase (HP) is a straightforward way to buy a car on finance. You pay a deposit upfront and then fixed monthly instalments over an agreed term. Once the final payment is made, you automatically own the car. There's no balloon payment and no decision to make at the end. Ownership is the outcome from the start. Monthly payments are higher than PCP because you're paying off the full value of the car over the term.
A £15,000 car on HP with a £1,500 deposit and £300 per month for 48 months comes to £15,900 in total. That's £14,400 in monthly payments plus the £1,500 deposit, with the remaining £900 covering interest. When the last payment clears, the car is yours. No balloon, no choice to make, no uncertainty. Simple and predictable.
Numbers simplified for illustration. Actual rates and total costs vary by lender, deposit size, and agreement terms.
People confuse HP with PCP because both involve a deposit and monthly payments. The key difference is what happens at the end. With HP, you own the car when you finish paying, guaranteed. With PCP, the lower monthly payments mean you've only covered part of the car's value, and you still need to decide what to do with the rest. HP is more expensive monthly but simpler overall.
This is an illustrative estimate only. It does not include arrangement fees, optional payment protection insurance, or any other charges that may apply. The actual total cost of credit will be shown in your finance agreement, which is regulated under the Consumer Credit Act. Always check the Representative APR and total amount payable before signing. If you are unsure, seek independent financial advice.
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