Hire Purchase Explained
Hire Purchase is exactly what it sounds like – a hire agreement which gives you an option to own the car at the end of the agreement. These are normally fixed cost, meaning that the APR (Annual Percentage Rate) is set before the contract begins. The loan period is also fixed – typically three to four years – and the finance agreement is secured against the car being bought, which means that lenders can be flexible in the terms and conditions they offer.
You are the ‘registered keeper’ of the car and responsible for insuring and maintaining it, but the finance company remains the legal owner until the amount you borrowed (plus the option to purchase fee) has been fully repaid.
A Conditional Sale agreement is the same as Hire Purchase, except that you will automatically own the car once the finance has been repaid in full. (i.e. there is no option to purchase fee)