- February 25, 2020
What Makes Hiring Purchase An Ideal Solution For Car Financing?
Car is a basic need that often people required in their daily life, but this doesn’t change the fact that buying it involves a lot of money. Car purchasing is one of the significant investments that any typical person would make in his/her life. Now, a large number of people in the UK go for car financing so that they can get their dream car faster.
So, if you have decided to buy a car, but don’t have enough savings to make the purchase, then Hiring Purchase could help you. It is one of the most popular car financing options available in the market that lets the borrower spread the overall cost of the car. This way, you can get the car and make the payment in instalment. Now, let us understand this concept clearly.
What is HP Finance?
Hiring Purchase or also known as HP is the way of car financing where the dealer provides you with the car till the time of the agreement. Meanwhile, you will have to make the monthly instalment, and after you have cleared the payment, the vehicle will solely and legally belong to you.
If possible, you can provide the deposit, but that is not compulsory. However, the larger the deposit you make, the lesser will be the amount that you will need to borrow. Thus, you could provide the saved money as the deposit and borrow the remaining amount by going with HP financing. But, whether you make the deposit or not, paying the monthly installment is mandatory that can be around from 1 to 5 years.
How Does HP Finance Work?
After you apply for HP financing of the car, the financial company will go through your application and analyse your creditworthiness. For this, all your details such as:
- Employment history
- Income status
- Credit score
- Personal details (Like Name, Address, etc)
Yes, there is an option where you can take HP finance without making any deposit. However, with no upfront cost, the borrowing amount will be higher and thus, the overall interest. Hence, if possible, try to provide a certain amount as a deposit. It will lower the burden of making a hefty monthly payment.
What Is The Difference Between HP and PCP Finance?
Now, people financing their car might get confused with Hiring Purchasing (HP) and Person contract Purchasing (PCP), as they function somewhat similar in certain aspects. It is correct that both of them work on the same principle where the borrower has to make a deposit and pay the later amount as installment.
However, there is one significant difference in them, and, i.e. In HP, you own the car after you have the made the last instalment. On the other hand, if you do with the option of PCP financing, you will have the option of whether you want to keep the car or not.
And to do so, you will have to make the final payment also known as the balloon payment. It is the amount that the financial company decides and predicts the value of the vehicle after the completion of the term.
Top Reasons To Go With HP Finance
There are plenty of reasons to go with HP finance to get a car, of which we have mentioned the major ones. So, let us see them.
- The benefit of spreading the complete cost of the car
- The car will be entirely yours after making the final payment
- Depositing the amount is not compulsory
- Unlike PCP, you don’t face any Balloon Payment to own the car
- The loan term is flexible and can range from 1 year to 5 years.
Remember, also that the monthly payments you will have to make will be decided by three factors that are:
- Deposited amount
- Length of the loan
- APR offered by the lender
Wrapping up, this was everything that you need to know about HP financing before you head to apply for it. Thus, go for it after you have understood its functionality and how it can benefit you.