Applying for HP: A Guide to Using a HP Finance Calculator
Curious about the cost of your next car on hire purchase (HP)? Get a clearer idea of your monthly payments with a car finance calculator.
While we don’t provide a dedicated HP finance calculator, our car finance calculator can still give you a useful guide. Simply input the amount you’d like to borrow, choose a repayment period that suits you, and add an indication of your credit rating. You’ll see an estimate of your monthly repayments along with the total you might pay over the term.
Once you’ve applied, our team can then work with you to get estimated payments for hire purchase (HP) agreements – one of the most common car finance options, much like the figures you’d find with an HP car finance calculator.
What is HP car finance?
HP is short for hire purchase. It’s the simplest form of car finance, whereby the cost of the car and interest are broken down into fixed monthly payments, so you own your car outright at the end of the deal:
- Pay an upfront deposit, usually around 10% of the car’s value
- Make fixed monthly repayments over an agreed term, typically 3-5 years
- Own your car once the final repayment has been made, with no balloon payment
Pros of HP finance:
- Simple and transparent
- Full car ownership at the end
- No large final payment to worry about
- Available on new and used cars
Cons of HP finance:
- Monthly payments can be higher than PCP
- It’s less flexible if you like to change cars frequently
HP explained in 60 seconds
Here’s a quick explanation of how HP works:
- Deposit – This is an upfront payment that’s typically around 10% of the car’s value
- Monthly payments – Your monthly payments cover the full value of the car plus interest
- No balloon payment – There’s no large payment at the end. You’ll own the car when the last payment is made.
- Best for – Drivers who want long-term ownership and simplicity.
How HP finance calculators works
So, where in the HP process does our loan calculator come in? In short, it gives you an estimate of what you’ll pay monthly based on the car you want (or an estimated cost).
It’s helpful before applying for finance or negotiating at a dealership, because you can work out what’s affordable for you each month or what your budget is for your next car.
To get your estimate, we simply need the vehicle price or the amount you need to loan, a repayment term such as three or four years, and an estimated credit profile – no need for an exact score.
What’s great is that this is a soft search tool. Our car finance calculator lets you check your options, including HP, and has no impact on your credit score.
While we don’t provide a dedicated HP finance calculator, our car finance calculator works in a similar way and can give you a clear guide to potential car finance repayments.
HP vs PCP: Which is right for you?
HP and personal contract purchase (PCP) are two of the most popular types of finance. If you’re new to car financing or you’ve always stuck with one method, you might be unsure which is best for you.
Here are the main differences:
- Monthly payments – HP costs more each month, because you’re covering the full value of the car. With PCP, your monthly payments only cover depreciation.
- Ownership at the end – At the end of a HP deal, you’ll own the car as long as all repayments are made. If you choose PCP, you’ll have a large balloon payment to contend with if you want to own your vehicle.
- Deposit requirements – You’ll usually need a 10% deposit to get approved for HP, whereas PCP deposits may be a little more flexible.
- Flexibility – With stricter deposit requirements and ownership assured, HP is a little less flexible than PCP.
PCP – best for:
Personal contract purchase is the better option for drivers who want to minimise their monthly payments and keep their options open in terms of ownership.
HP – best for:
Hire purchase finance is better for drivers who want to own their car outright and can afford the deposit with slightly higher monthly payments.
HP car loan calculation example
Want to see how our HP finance calculator works? Here’s a realistic scenario. Let’s say the car you want is worth £15,000 and you have enough for a 10% deposit. You want a 48-month deal
Your deposit will be £1,500, so you need to borrow £13,500.
Using our representative APR rate of 9.9%, you’ll pay a total sum of £16,294.96. This is spread across 48 monthly payments of £339.27.
After four years, once all those payments are made, the car is yours. There’s no balloon payment, so you own it outright.
Of course, the deal could change based on a few factors:
- Higher deposit – By paying more at the start, you’ll reduce the loan amount and cut your monthly costs.
- Longer term – This will spread the cost thinner, resulting in lower payments but more interest paid overall.
- Better credit – With a better credit score, you could benefit from a lower APR to reduce the total cost.
What information do I need to apply for HP car finance?
So, whether you’ve checked figures with an HP finance calculator or used our car loan calculator, what comes next? Here’s what you’ll need to begin the process:
- Your full name and current address
- Information about your job and earnings (monthly or yearly)
- Your budget or details of the vehicle you’re interested in
- An idea of your annual mileage and preferred repayment term (3, 4 or 5 years)
- An approximate credit rating or score
There’s no need to have every detail perfect at this stage. Our process begins with a soft credit check, which won’t affect your score. This lets us see if you’re likely to be approved before taking things further.
Can I use HP finance on a used car?
Absolutely. HP is ideal for financing used cars. Going for a used or nearly-new vehicle can reduce your monthly costs and minimise depreciation.
It’s worth noting that used cars usually have to meet certain criteria when it comes to their age or mileage. Lenders might only approve HP on cars that are less than five years old or have done up to 70,000 miles, as an example.
My Car Credit can make this a little easier thanks to our My Car Search facility. It allows you to search nationwide stock of trusted used cars, which are likely to be approved by our panel of lenders.
What happens at the end of an HP agreement?
There’s nothing complicated at the end of your HP agreement. Once you’ve made the final monthly payment, the car is yours. Unlike PCP deals there’s no balloon payment, no mileage checks and no return process.
HP finance tips for UK car buyers
Starting your journey with an HP finance calculator can be a useful way to get a rough idea of potential repayments before applying. While we don’t provide a dedicated HP loan calculator, you can use our general car finance calculator to get similar estimates and then refine them with our team’s support. From there, here’s how to navigate the rest of your journey like a pro:
- Choose the right repayment term – You want as short a term as possible to minimise total interest, but it needs to be long enough to spread the car’s cost enough to fit your budget.
- Consider a bigger deposit – If you have the funds available, it’s a smart move to increase your deposit. This will reduce the loan amount, your monthly payments, interest charged and the overall cost.
- Don’t rush when choosing a car – HP is ideal when you want to keep a car long-term. Compare different models and test drive if possible to find a car you love.
- Review APR terms carefully – Before signing, make sure you’ve checked the different fees and terms in your deal. APR includes all charges and fees, giving you a clearer cost of your loan compared to interest rates alone.
- Compare multiple quotes — You should shop around when you’re buying anything, and car finance is no exception. Using a broker like My Car Credit makes this easy, as we compare deals from a large panel of lenders on your behalf.
Why choose My Car Credit for HP car finance?
There’s a reason thousands of UK drivers go beyond our car finance calculator to get a HP deal through My Car Credit. As part of Evolution Funding, we can draw on a large network of reputable lenders – helping us find hire purchase deals for all kinds of credit histories, from strong to less-than-perfect.
Because we’re an FCA-regulated broker, you can rely on us for clear, trustworthy guidance, backed by real people who are ready to help when you need them. Our straightforward online process means you can get a quote in minutes and pick up your application whenever it’s convenient.
Use our car finance calculator for an initial estimate, then let our team shape that into personalised HP options – giving you more value than a HP car finance calculator could.
Get a personalised HP quote today
When you’re ready to move forward with your HP application, My Car Credit is here to guide you. Once you’re satisfied with the figures from our car finance calculator, you can start the process with ease – whether it’s for a brand-new or used vehicle.
We’ll provide a quote that reflects your personal circumstances, considering all types of credit history. There’s no commitment at this stage, and our initial checks are soft searches, meaning your credit score won’t be affected. A hard credit check may be carried out later if you choose to proceed with a lender’s offer.
HP Finance FAQs
An HP car loan lets you spread the cost of a vehicle into fixed monthly payments. You hire the car while repaying, and ownership transfers to you once the final payment is made.
HP usually suits those wanting full ownership and no large final payment. PCP often offers lower monthly payments but requires a balloon payment to own the car. The best choice depends on your needs and budget.
Absolutely. Once you’ve made all the agreed payments, including any option-to-purchase fee, the car is legally yours.
Yes, some lenders offer HP deals for applicants with poor credit. You may face higher interest rates, but brokers can help find suitable options.
You can usually repay the balance early, though settlement figures may include interest or fees. Your lender will confirm the total amount required.
Many lenders offer HP finance for used vehicles, subject to age and mileage limits. Terms vary, so check the lender’s criteria.
Secure your dream Aberdeen car finance today
Finding car finance needn’t be a hassle – and with My Car Credit, it won’t be. Use our car loan finance calculator for a breakdown of your expected monthly payments and more. Or to learn more about how we can help you, call us on 01246 458 810 or email us on enquiries@mycarcredit.co.uk today.