There are few things more exciting than looking to buy a new car, but it can be tough to do this when you’re being hindered by bad credit - if you’ve got a credit score that lower than you’d like it to be, you may find that you’re being rejected for certain deals, or simply finding it difficult to be able to afford the prices that you’re being quoted. Whilst this may sometimes be the case, there are certain providers car finance companies that focus on helping those with bad credit to be able to afford the right car - here at ChooseMyCar, we’re specialists in bad credit car finance, meaning we understand to problems faced by those with poor or no credit score and can help our customers to work with those to enable them to get back on the road. There are lots of different car finance options here at ChooseyCar, including PCP car finance, hire purchase deals, or guarantor loans, all of which can be used to help you purchase a reliable vehicle whilst building up your credit score by keeping up regular monthly repayments. You can learn more about our hire purchase (HP) car finance deals by reading on below!
What is hire purchase (HP) car finance?
The first question that you’re probably asking is exactly this: what is hire purchase car finance? The answer to that is a simple one - it is a car finance payment option that focuses on monthly repayments, at the end of which the applicant will be the owner of the car.
But why are these deals so appealing? For many, the appeal lies in the flexibility of these deals - with most car finance providers, allowing you to spread the payments over a length of your choosing, from 1-5 years. This allows you to manage costs and ensure that the car is affordable in line with your monthly earnings. Our flexible repayment terms here at ChooseMyCar are a great way to find a payment plan that suits you. In addition to this, you’ll also own the car at the end of your HP credit agreement - this can either be automatically or after a small ‘option to buy’ payment, but the terms of this will be outlined in your contract so please be sure to check this so you’re aware of the situation at the end of the agreement. To help you decide whether a hire purchase deal is right for you, we’ve broken down some of the most common questions and queries that are asked regarding the finance option - we hope this helps to give you a little more information on the topic and helps you to make an informed decision regarding the payment plan for your new car.
What happens at the end of the agreement?
One of the main differences between hire purchase agreements and other payment plans is the protocol at the end of the agreement. Where in other cases, such as a PCP agreement, you may hand the car back to the dealership and ask for an upgrade or different vehicle, in an HP agreement you will actually be the owner of the car at the end of the payment plan. In some cases, this will automatically happen after your last payment, whereas with some lenders there is a small final payment to be made before the car is yours to keep. Whichever option your contract states, an HP agreement is usually one of the cheapest and most affordable ways to own a car using a monthly payment structure. This option to buy cannot be negotiated after the contract for the agreement has been signed, so be sure to check that you’re happy with the fee quoted before entering the finance plan.
If you’re currently in a hire purchase agreement, there are ways in which you can terminate your contract early, but you need to be very careful about how you approach this if you want to avoid incurring and additional costs. If you’re looking to pay off your contract early with a lump sum, this is usually possible, however, you may be subject to an early termination charge. As in most cases, this can differ from broker to broker, so be sure to check the finer details in your contract before committing.
What many people do not know on the topic of terminating your HP contract early is that there is often a clause in your agreement that states that you will be able to return the car and walk away if you have paid off at least half of the value of your hire purchase agreement. This clause is known as ‘voluntary termination’, and you’ll definitely want to check if this is included in your terms. This can be a great option for those who have found that they no longer require the vehicle, or who are looking to reduce their monthly outgoings by quite a considerable amount by eliminating their car payments.
Who will benefit from this type of car finance?
Hire purchase car finance plans are great for individuals who are set on owning their car at the end of the payments plan, as this is exactly what they’ll get after their final monthly payment has been completed! One thing to bear in mind with these packages is that the monthly cost can usually be a little more expensive than other car finance plans - this is because there is no large final balloon payment at the end of the agreement, instead this payment is built into the monthly cost so the applicant will automatically own the vehicle once the agreement is paid in full.
A hire purchase agreement can be a good option for those who find themselves struggling with bad credit, but these individuals should proceed with caution to avoid falling into unmanageable debt due to the aforementioned higher monthly repayments.
Although you may be able to gain approval for a hire purchase deal if you have bad credit, it may mean that your APR will be higher than it would be if your credit history was stronger. This may result in paying slightly higher monthly payments than you might with a good credit score, but the benefits of a hire purchase finance plan are still clear to see even if you do struggle with bad credit.
What are the differences between HP and PCP?
Hire purchase and personal contract purchase (PCP) are two of the most common types of car finance that you are likely to encounter when looking to purchase a new car, so it’s important to know what they are, but also what the differences are between them are too. The general idea behind both of the finance plans remains the same - you’ll have a set amount of money to repay over a predetermined length of time, which will be repaid in equal monthly instalments. This cost will include the cost of the vehicle as well as the interest charged for the service, which, whilst increasing the overall price you’ll pay for the vehicle, will make it easier to pay over a period of time thanks to the easy to manage monthly payment structure.
The main difference between HP and PCP is what happens at the end of the agreement. In a hire purchase agreement, you will own the vehicle after your last payment or, in some cases, the ‘option to buy’ fee, which is usually a very small fee to complete the purchase - this fee can sometimes be as low as £1. On the other hand, your PCP finance plan will have lower monthly payments than you would see on an HP plan, but there is a large lump sum at the end of the agreement if you want to own the vehicle at the end. If you don’t want to keep the car, you can simply hand it back or part-exchange it for an upgrade!
What happens if you miss a payment?
Missing a payment during any kind of payment plan can cause problems, so if you’re able to repay your debt please ensure that you do so. In the case of a hire purchase agreement, your car is used as leverage by the lender, meaning their risk is reduced in these circumstances as they will be able to repossess your vehicle in the event of missed payments. Of course, this is the worst-case scenario for most agreements and there will likely be some room to negotiate with your lender to come to an agreement for repaying the missed debt, whether that is an increase to your payments each month or extending your payment period so that the debt is still repaid.
The other major downside to missing payments on your hire purchase agreement is the impact that it can have on your credit file. Missed payments on any finance agreement can negatively impact your credit score, and will likely remain on your file for quite some time. The long term effects of this could lead to your credit score taking a hit or rejections in future finance or credit applications. For this reason, it’s vital that you do everything you can to ensure that every monthly payment is made on time and in full, otherwise, you could risk having your vehicle repossessed and having negative credit score implications as a result.
Here at ChooseMyCar, we have a handy car finance calculator that helps you to figure out exactly how much your car finance package might cost you, giving you a quote that enables you to have a better idea of how affordable it might be in relation to your monthly income.
Will a HP deal impact my credit score?
A hire purchase deal can impact your credit scores in whichever way you let it - it’s all down to how you manage your finances and how well you are able to maintain regular payments in full on the debt that you owe. If you stick to your payment plan and pay each instalment on time and in full, you’ll see your credit score benefit as a result as you’ll be providing evidence that you are a reliable, trustworthy borrower. On the other hand, people who miss payments, make payments late, or who have defaulted on payments will see this impact their credit file in a negative way. This could potentially result in your credit score being lowered, with the evidence of missed payments and defaults also remaining on your credit file for future lenders to see during any applications that you may make after your hire purchase car finance deal. If this is the case, it’s likely that you may find it difficult to gain approval for loans and credit, as well as being faced with higher interest rates across the board.
In short, your HP deal has the power to drastically improve or damage your credit score - it is completely dependent on your own personal behaviour when it comes to making your repayments.
Can I get this type of car finance agreement with bad credit?
Bad credit can be something that makes it incredibly tough to find the right car finance package with many providers - you’ll often be hit with astronomically high interest rates, unfeasible minimum initial deposits, and incredibly harsh terms to follow. This can make the entire process one that’s entirely off-putting as an application. Here at ChooseMyCar, we’re committed to helping those who struggle with bad credit to get back on the road in the right car. To do this, we ensure that we offer a wide range of different types of car finance to suit everyone’s personal circumstances, whether that’s PCP, guarantor, personal loan, or the hire purchase deals that we’re talking about here.
Our 2 step credit checks ensure that you’re only ever submitted to a hard credit check if you’re already been pre-approved for one of our deals - this means that hard credit checks (the type that appears on your credit report) are only conducted when there is a high chance of approval. This is an ideal process for those who suffer with bad credit, as repeated credit application rejections can be a major red flag to have on your credit record for future lenders. With ChooseMyCar, you’ll know that you’re being handled by a team that understands your circumstances and is committed to helping you set up an affordable payment plan for the perfect vehicle.
What details will I need to provide?
During your car finance application, there are a few mandatory details that you’ll have to give to us in order to ensure that we are able to provide you with a vehicle using credit - this is to ensure that the deal is safe for all parties and that all details are in order before any credit is granted. The information required is actually rather basic and is not dissimilar to that which you would disclose during any other credit application or payment plan setup. Below, you can find the details that you’ll be expected to provide during your application:
Personal Details: As you’d expect, your personal details will need to be provided before an agreement can be signed - this is so we know who you are, what your circumstances are, and whether you will be eligible for one of our credit plans such as hire purchase. The details that we’ll need are:
- Your full name
- Your date of birth
- Your marital status
- Your residential status (such as homeowner, living with parents, or renting, etc.)
- Your address history covering at least the last 3 years
Bank Details: For payment and identification validation purposes, your bank details will be required during the finance application. In this instance, you would need to let us know the following:
- The account details from which your monthly payments will be taken (account number and sort code, as well as the branch address)
- The name on the account (this must be your name)
- As with the above, a 3-year address history
Employment Details: Another piece of information that we will need to proceed with the credit application is your employment details - with this information, we are able to confirm that you have steady employment that will allow you to maintain regular payments against the debt that is owed. To fulfil this, we will require the employer’s name and address, including postcode. The employment history that you provide must cover at least the past 3 years, so if you have moved jobs within that time, you’ll need to provide all the relevant employer’s details.
Identification Documents: Lastly, a couple of identity documents will also be required in order to complete your online application - this is to verify your identity to prevent cases of fraud and theft. There are 3 different types of identification that you’ll need to show to us, these are:
- Driver’s license - if you’re applying for car finance for yourself, it’s likely that this will be the easiest step. We will need a copy of your driving license to confirm both your identity and that it is legal for you to drive a vehicle in the UK.
- Proof of address - a document that evidences the correct living address will also be required. This can be a utility bill (on which you are named), or a bank statement. In most cases,you will be asked to provide two forms of proof of address.
- Proof of income - this is the final form of identification that you’ll be asked to provide. Proof of income allows the lender or broker to confirm that you are able to afford your monthly repayments based on the money that you earn each month. This document can be a payslip, accountant’s record, or even a bank statement - it just needs to show regular income into your account.
ChooseMyCar’s car finance deals
Here at ChooseMyCar, we understand that cars aren’t a one-size-fits-all item - everyone is going to need their own variation for a different set of purposes. To cater to that, we ensure that our range is bursting with vehicles in every shape, size, colour, and price band that you could imagine, from budget city cars to a more elegant coupe for the modern businessman. Whatever it is that you’re after, we’re sure to have something available in our extensive network of dealerships across the UK.
Our hatchbacks are a particular favourite - they’re compact, great runners, and will get you from A to B with no problem at all. There’s a reason they’re the UK’s most popular car. Whether you’re looking to navigate the bustling city centre roads or just something that’s capable of handling the daily commute into work or to the shops, they’re a perfect choice. What’s more is that hatchbacks come in at some of the most competitive prices on the market, meaning you don’t have to break the bank to make use of their fantastic mix of utility, style, and efficiency on a daily basis.
Alternatively, our estate cars collection is ideal for the modern family. These cars are spacious, comfortable, and sophisticated - everything you need to manage a school run, the daily commute, and even family holidays with finesse and sophistication. Click here to check out our range of estate cars!
If you’re looking for something that can adapt to meet your needs, you can’t look beyond our range of MPV; our multi-purpose vehicles are incredibly flexible, featuring a spacious interior with a customisable layout. This means you can remove seats when more space is needed, then add them back in for big family trips or days out!
For something with a little more statement style, the coupe is a great fit. The sleek, elegant designs are coupled with decadent interiors and a wealth of high-end technology - if you’re looking to make a big entrance or to feel like the king of the road, there’s no better choice than a coupe.
You can find vehicles from the above categories and more by checking out our full catalogue right here on our website today, or alternatively, get in touch if you’d prefer to chat to a member of our friendly team to help you find the right vehicle for you and your family!
Whats an HP going to cost me?
The cost of a hire purchase all depends on your credit rating and the condition of your finances. You can, of course, set your monthly contributions, and determine the amount you want to pay a month, but if you have bad credit then you may well receive higher APR (Annual Percentage Rate) charges. Here, we'll look to outline the difference in cost for hire purchase agreements, and the regular instalments, for people with a range of different credit scenarios. You'll see that, with the preferential rates, the monthly interest is a lot less, hence why we stress the importance of improving your credit rating when it comes to hire purchase payments. For all the following examples we'll be using our typical APRs, not actual loan rates as these might differ depending on your specific circumstances. To get an exact rate, we’d encourage you to apply for car finance today.
For the purposes of this example, and to showcase the different HP costs based on credit scores, and typical APRs, we'll use the same parameters. For the example, we'll look to borrow £10,000 and pay it back over 48 months, which is 4 years. Of course, here at ChooseMyCar, we can help you borrow up to £50,000, and offer loan repayment terms from between 12-60 months (which translates to 1-5 years).
So, if your credit score is...
Assuming, after a credit check, you have an outstanding credit score, then you'll be subject to our typical lowest interest rate - 6.9%. So let's say you then opt for that aforementioned hire purchase deal, with ChooseMyCar, you would pay £238.04 a month for 48 months, after which, the car will be yours. Based on these figures, the total amount repayable is £11,425.92.
A good credit score is still very admirable, and you're still in line for a great deal on your HP plan. A typical APR for someone with a good credit rating is 9.2% which means you would pay £248.07 a month for the 4-year time period. This added up, means the total amount repayable is £11,907.36.
A lot of people will get by with a fair credit score and, at ChooseMyCar, we have a typical annual percentage rate of 13.2% for people in this bracket. So, with the parameters above set, our finance calculator indicates that you would pay £265.62 a month, a total amount repayable of £12,749.76, before owning the car 4-years later.
A poor credit rating results in a 19.1% APR which means that a £10,000 loan, over 4-years, results in monthly payments of £291.71 for 48 months, with the total amount repayable being £14,002.08.
Now, while a bad credit score isn't ideal, it does not prevent you from attaining different types of finance, be that an HP agreement, or personal contract purchase. Our typical APR for people with a bad credit score is 25.4% which means that, per month, you'll pay £319.69 until the agreement is over, and you own the car. The total amount repayable is £15,345.12.
It's clear, then, that having an excellent credit score does make a vehicle purchase, and vehicle ownership, much cheaper. The difference in monthly cost for someone with an 'excellent' rating versus a 'bad' rating is £81.65, with the total amount repayable being £3,919.2 more expensive for people with the latter rating. These differences aren't intended to scare you off, there are plenty of people who get accepted for car finance with a bad credit rating, it's just about managing budgets, expectations, and understanding what the long-term costs are. At the end of the day, if you know you can afford the pre-agreed monthly payments, then your credit rating isn't the big deal you may think it is.
Our favourite models that you can drive away with using an HP agreement
On this page, we have mentioned the range of different used car types that we offer, all of which are fantastic, and guaranteed to suit the needs of every individual, and their family, who is looking for hire purchase car finance. However, we, of course, have our favourites and in this section, we're going to be looking at some of our favourite vehicle models that can be yours after a deposit contribution is paid, and monthly agreements are outlined.
In terms of hatchbacks, they really are ten a penny, there is so much choice out there for people looking for nimble, zippy, vehicles that are just as fun as they are practical. For us, though, the Volkswagen Up! takes the crown thanks to its choice of four different engines, emphasis on fun, amazing sound system, and ability to tackle the high street, and the countryside, with an equal amount of vim! Other notable models include the Skoda Citigo, SEAT Mii, and Toyota Aygo.
Here at ChooseMyCar, we think that, just because something is practical, doesn't mean it can't be fun, and that's why we love the Mazda CX-5. The SUV has sharp styling, Japanese reliability, and fantastic handling, making it one of the best vehicles in this category, along with the Nissan Qashqai, Seat Ateca and Skoda Karoq. For us, though, the CX-5 takes the crown because of its amazing looks and, as if things couldn't get better, it's available to you via a hire purchase agreement - not bad!
A final favourite of ours, available in affordable instalments on an HP deal, is from the range of sports cars that we have on offer, and it is the BMW Z4. With its waspy nose, long bonnet, and an optional soft-top roof, it really is the sports car of the moment. While competitors, such as the Mercedes-Benz SLK, may claim they are the superior model, the straight-six turbocharged engine, plus all the other aforementioned benefits, make the Z4 our favourite. And, after agreeing on an HP deal, we think you'll fall in love with this car too... just remember to watch the speedo!
While these are our favourites, there are, of course, dozens of cars from a wide range of different categories that are sure to suit your needs - from the practical, to the exciting, to everything in between. Whatever car you're after, our team here at ChooseMyCar would be delighted to help you along the process so that, before you know it, you've got the keys to your dream machine!