Buying an electric car on hire purchase (HP) explained

Hire purchase finance remains a very popular way of buying a car in the UK. This is how it works

Car finance delaer


  • Usually cheaper than using a PCP if you want to own the car
  • Repayment terms are usually flexible


  • Costs more on a monthly basis
  • Not designed for people who like to swap cars regularly

A hire purchase (HP) agreement is a bit like a loan. The cost of the car is divided into a series of equal payments over a set period, usually three, four or five years, minus any deposit you put down. The interest rate is fixed for the duration of the agreement, so even if interest rates rise, your payment won’t. HP is normally easy to arrange at the dealer or car supermarket, but it’s also possible to do it online or over the phone.

Once you’ve made the final payment, you own the car. It’s a very transparent way to buy a vehicle, but many buyers are put off because the monthly cost is higher than with a PCP. However, it does tend to work out cheaper than an unsecured personal loan and, unlike a PCP, there’s no final lump sum to pay.

You need a deposit for HP, which is usually around 10% of the car’s list price. Sometimes, to encourage a sale, dealers add a deposit contribution to sweeten the deal. If a car is nearing the end of its time in production, you might even get a zero-deposit deal.

As hire purchase is secured against the car, if you don’t keep up repayments, the car could be repossessed. This is why HP is also more favourable for people with poor credit ratings, as there’s less risk to the lender.