Question 1

Can I sell my car with HP on it?

Accepted Answer

Selling a car with HP finance on it is possible, but it requires some additional steps. Since the lender holds a security interest in the vehicle until the finance agreement is paid off, you'll need to get what’s called a ‘settlement figure’ from the lender. A settlement figure is the amount needed to pay off the remaining finance balance. Once you have this information, you can sell the car to a buyer, and the money you make from the sale can be used to settle the finance agreement. After the finance is cleared, you can transfer ownership of the vehicle to the buyer. It's important to inform the buyer that there is outstanding finance on the car and to ensure that the sale is conducted legally and transparently.

Question 2

How do I get rid of HP finance?

Accepted Answer

To get rid of HP finance, you typically need to pay off the remaining balance owed on the vehicle. This can be done by making the final payment, which may include a balloon payment if applicable, or by paying off the remaining loan amount in full. Once the finance agreement is settled, you'll receive documentation confirming ownership of the vehicle, and the lender's security interest will be removed.

Question 3

What are two disadvantages of the balloon payment?

Accepted Answer

Two disadvantages of the balloon payment in a PCP agreement are the risk of overestimating the car's future value and the potential financial burden of making a large lump sum payment at the end of the term. If the car's market value depreciates more than anticipated, you might find yourself owing more than the car is worth. Additionally, making up the funds to pay the balloon payment can be challenging for some people, leading to financial strain or difficulty securing funds.

Question 4

What if my car is worth more than the balloon payment?

Accepted Answer

If the market value of your car is higher than the balloon payment at the end of your PCP agreement, you may have equity in the vehicle. This means you could sell the car for more than the amount needed to make the final payment. In such cases, you have the option to use the excess funds towards purchasing a new car or pocketing the difference.

Question 5

Who owns the car on PCP finance?

Accepted Answer

Just like on HP finance, the finance company or lender technically owns the car while you’re making your monthly repayments on a PCP finance agreement. Full ownership will only transfer to you if you choose to make the final balloon payment at the end of the term.

Question 6

What happens if you crash a car on HP finance?

Accepted Answer

If you crash a car that's under HP finance, the situation can become complicated. Typically, you're required to maintain comprehensive insurance coverage to protect both yourself and the lender's investment in the vehicle. In the event of an accident, your insurance may cover the cost of repairs or replacement depending on your policy's terms. However, if the car is deemed a total loss and the insurance payout doesn't cover the outstanding balance owed to the lender, you may still be responsible for paying off the remaining finance amount.

Question 7

Who owns the car on HP finance?

Accepted Answer

While you're making payments, the lender technically owns the car. During this time, you are listed as the car’s ‘registered keeper’. Once all payments are made, full ownership transfers to you, and the lender's security interest is removed.

Question 8

Is it worth buying a car at the end of a PCP?

Accepted Answer

Whether it's worth buying the car at the end of a PCP agreement depends on various factors such as the vehicle's condition, how much it’s worth (market value) by the end of your agreement, and your preferences. You can ask the lender to value the car before you decide to pay the final balloon payment, which could help you evaluate whether it’s worth buying, or whether you’d be better off handing it back and switching to a newer car instead.

Question 9

Do you keep the car at the end of HP finance?

Accepted Answer

Yes, with HP finance, you keep the car once all payments, including any ownership transfer fees, have been made. Ownership transfers to you upon completion of the agreement, and you get to keep the car for as long as you want it.

Question 10

Does HP affect credit score?

Accepted Answer

Having HP finance itself doesn’t directly impact your credit score, but the way you handle your agreement could do. Making your payments on time (without missing any) can positively impact your creditworthiness, while missed or late payments may damage your score.

Question 11

Does HP affect car insurance?

Accepted Answer

HP finance doesn't directly impact car insurance requirements, but lenders typically need you to take out comprehensive insurance coverage to protect their investment in the vehicle.

Question 12

Can I pay off HP finance early?

Accepted Answer

Yes, most HP agreements allow for early repayment. However, it's essential to check the terms of your agreement, as there may be fees or penalties associated with early repayment.

Question 13

What happens if you can’t afford your HP car?

Accepted Answer

If you find yourself unable to afford the repayments on your HP car finance agreement, you should contact your lender straight away and let them know your situation. They will be able to discuss your options with you, which could include setting up a different repayment plan. It’s essential that you do this, as if you default on (miss) any HP payments, the lender may repossess the vehicle to recover their losses. This can result in the loss of ownership and negative effects on your credit score.

Question 14

Why is HP more expensive than PCP?

Accepted Answer

HP typically involves higher monthly payments than PCP because you're financing the full value of the vehicle, whereas PCP only covers a portion. Additionally, interest rates may differ between the two financing options, contributing to the price difference.

Question 15

Is HP a good idea for a car?

Accepted Answer

HP can be a suitable option if you prefer outright ownership, predictable payments, and plan to keep the car long term. It provides a clear path to ownership without the need for a large upfront payment.

Question 16

Is HP finance hard to get?

Accepted Answer

Approval for HP finance (or PCP finance, for that matter) depends on various factors such as your credit history, income, and the value of the vehicle being purchased. Generally it is not hard to get car finance, however if you have a poorer credit score or don’t have enough income in the eyes of the lender, you may struggle more than others. It’s all down to whether or not you meet the lender’s criteria.

Question 17

Do you own the car after PCP finance?

Accepted Answer

Initially, you don't own the car outright with PCP finance. However, you do have the option to own it by paying the final balloon payment at the end of the agreement.

Question 18

Do you own the car after HP finance?

Accepted Answer

Yes, with HP finance you become the legal owner of the vehicle once you’ve paid off all your monthly payments, plus any final admin fees or transfer of ownership fees. Once these are paid, the car will be officially transferred into your name as the legal owner.

Question 19

Can you go from PCP to HP?

Accepted Answer

Yes, it is possible to change from a PCP to a HP finance agreement, although it will depend on the terms of your specific PCP agreement, and on the policies of your lender. If you decide to go from PCP to HP, and your lender agrees to this, you would typically use the new HP agreement to finance the remaining balance of the car's value, including the balloon payment from your old PCP agreement. Essentially, you're converting the remaining amount owed on the car into a new Hire Purchase agreement, where you'll continue making fixed monthly payments until you've paid off the full value of the vehicle.

Question 20

Is PCP worth the money?

Accepted Answer

PCP can be worth it if you lower monthly payments and driving new vehicles regularly is what matters more to you than car ownership. However, it's important to consider the total cost, including interest and the final balloon payment, if you decide you want to own the car at the end of the agreement. This can sometimes mean you’re paying more for a car than you would if you’d bought it outright, so it all comes down to what matters most to you, and your financial situation.

Question 21

Is PCP better than buying outright?

Accepted Answer

PCP can be advantageous if you’re seeking lower upfront costs and flexibility. However, buying outright means immediate ownership without future payments or restrictions, which may be preferable depending on your financial situation and how much outright car ownership matters to you.

Question 22

Is It better to own a car or PCP?

Accepted Answer

Again, there is no outright ‘better’ option for everybody here, it all depends on your circumstances and what matters most to you about car ownership. Buying and owning a car outright provides freedom and means you are not paying off a loan every month. However, PCP offers a faster route to potential ownership if you don’t have the money to buy a car outright just now. It offers lower initial costs, the option to pay monthly amounts that suit your budget, and the opportunity to own the car at the end by paying the balloon payment. If you decide not to own it, you can upgrade to newer models every few years instead, making it preferable for some individuals than owning the car.

Question 23

What are the negatives of HP?

Accepted Answer

Although HP provides automatic ownership at the end of the agreement with no balloon payment to make, the monthly payments on a HP finance agreement tend to be higher compared to PCP. Additionally, if you default on payments, the lender may repossess the vehicle, resulting in loss of ownership and financial implications.

Question 24

What are the negatives of PCP?

Accepted Answer

While PCP offers lower monthly payments and flexibility, there are some drawbacks to consider. These may include mileage restrictions, wear-and-tear charges upon returning the vehicle, and the fact that you don't own the car outright until making the final balloon payment.

Question 25

Which one is better, HP or PCP?

Accepted Answer

The answer to this question depends entirely on your personal preferences, your financial situation, and what matters most to you when you’re financing a car. If your main goal is to own the car at the end, and if you can afford the monthly payments, HP finance is probably the better option for you. If, however, you don’t really mind whether you own the car or not, and if you think you’d prefer to change cars every few years, then PCP is likely to be the better option. No single option is ‘better’ overall when it comes to HP vs PCP, it’s all down to your individual situation.

Question 26

What does PCP and HP mean?

Accepted Answer

PCP stands for Personal Contract Purchase, while HP stands for Hire Purchase. Both are financial agreements that many people use for buying cars and other vehicles. And both of them involve splitting the cost of the car into smaller monthly payments, but they work slightly differently from one another.

Question 27

What is the difference between PCP and HP car finance?

Accepted Answer

In the world of vehicle financing, acronyms like PCP and HP frequently pop up, leaving many wondering about what they mean and how they are different. If you're in the market for a new car and you’re thinking of paying using car finance, understanding the differences between PCP (Personal Contract Purchase) and HP (Hire Purchase) will help make the process a lot easier. Let's explore PCP vs HP financing options to help you make an informed decision on which is best for you.

What is The Difference Between PCP and HP Car Finance?

What does PCP and HP mean?