HP / Hire Purchase Calculator
Work out monthly hire purchase payments for any car. Typical UK HP APR: 6–12%.
What is hire purchase (HP)?
Hire purchase is the most straightforward way to finance a car in the UK. You pay a deposit, then spread the car's full remaining value across fixed monthly instalments over a set term — usually between two and five years. Because you are paying off the whole value of the car (plus interest), there is no large balloon payment waiting at the end, and there are no mileage limits to worry about. Once you have made the final payment — plus a small "option to purchase" fee, which most lenders charge — the car is yours outright, no strings attached.
HP suits drivers who plan to keep the car for a long time. Your monthly payments are higher than on a PCP deal for the same car, because you are paying down the full balance rather than part of it. But that is also the trade-off: there is no surprise bill at the end of the term, and you know exactly what you owe from day one. A 10% deposit is the common starting point, though putting down more lowers both your monthly payment and the total interest you pay. Enter your figures above to see what a real HP deal looks like in pounds and pence.
HP vs PCP — which suits you?
HP and PCP (personal contract purchase) are the two most popular ways to buy a car on finance, but they work very differently. With HP, your fixed monthlies pay off the car's entire value, and you own the car at the end. With PCP, your monthlies only cover part of the car's value, and a large balloon payment is left over — pay it and keep the car, hand the car back, or part-exchange it. That structure makes PCP monthlies lower, which suits drivers who change cars every few years.
If you intend to keep the car beyond the finance term, HP is usually the cheaper route overall, because you avoid the balloon and any excess-mileage charges that can come with PCP. If flexibility and lower monthly outgoings matter more, PCP may suit you better. Run the numbers both ways before you sign: try our PCP monthly payment calculator for a side-by-side feel, and if you are already in a PCP agreement, our PCP early settlement calculator shows what it costs to exit early.
Frequently asked questions
How is HP different from PCP?
With hire purchase you pay off the car's full value in fixed monthly instalments, so you own the car outright at the end of the term with no balloon payment and no mileage limits. With PCP your monthlies are lower because they only cover part of the car's value, leaving a large balloon payment due at the end — pay it to keep the car, or hand the car back or part-exchange it instead. HP suits drivers who plan to keep the car; PCP suits those who change cars every few years.
Do I own the car on HP?
Yes — but only after the final payment. During the agreement the finance company technically owns the car, which means you cannot sell it or modify it significantly without their permission. Once you make the last monthly payment (plus any small option-to-purchase fee, which most lenders charge), ownership transfers to you and the car is fully yours.
What deposit do I need for HP?
Most UK lenders ask for at least a 10% deposit, which is the default in this calculator, though deals with smaller deposits exist for buyers with strong credit. A larger deposit reduces your monthly payment and the total interest you pay over the term, so it is usually worth paying what you comfortably can upfront. Some lenders may ask for more if your credit profile is weaker.
Can I settle HP early?
Yes. Under UK rules you can make overpayments or settle a hire purchase agreement early at any point, and you will receive a rebate on some of the interest you would otherwise have paid — this is known as a settlement figure. There may be a small settlement fee, but early settlement generally saves you money overall. Always ask your lender for a formal settlement figure before paying.
Is HP cheaper than PCP overall?
Usually yes, if you plan to keep the car. HP monthlies are higher because you are paying off the car's full value, but there is no balloon payment and no excess-mileage charges, so the total amount paid is typically lower than PCP for the same car. PCP works out better only if you value lower monthlies and are happy to hand the car back or pay the balloon at the end.
Estimate only — actual offers depend on your credit status, the lender's terms and any fees. Figures exclude insurance, tax and maintenance.