Hire Purchase - Suitability explanation
Hire Purchase (HP) allows you to spread the cost of the purchase of the vehicle at a fixed rate of interest. You will pay an initial amount which is followed by fixed monthly payments over a fixed term of up to 5 years. The vehicle belongs to the finance company until the last payment is made at which point you become the owner.
Hire Purchase may not be suitable for you in certain circumstances. For example:
- There is no option to return the vehicle as by entering into a Hire Purchase agreement, you have already agreed to purchase the vehicle.
Benefits of Hire Purchase
- Vehicle is registered in the company name
- Road fund licence is only included for the first year
- VAT reclaimable on commercial vehicle (subject to business being vat registered)
- Can claim capital allowances (or annual investment allowance for commercial vehicle subject to conditions)
- Fixed monthly payments not subject to VAT
- No mileage restriction
Taking care of the vehicle and your responsibilities:
- You must ensure that the vehicle is always comprehensively insured.
- You must pay any additional charges that you incur for example a parking fine or congestion charge on time. If you don’t, the cost and/or fine will be issued to the finance company who will invoice this to you together with an administration charge that they will levy.
- You must have the vehicle serviced and maintained by a main franchised dealer in accordance with the manufacturer’s recommendations and keep it roadworthy. You may add a cost-effective maintenance package which will cover routine servicing, maintenance costs and tyres, subject to fair wear and tear plus breakdown assistance to enable easy budgeting and give you fixed cost motoring. If you include a maintenance package please note the funder may decline to settle any charges if the total mileage on the agreement is exceeded.
Failure to make payments in full and on time may result in the contract being terminated and the vehicle repossessed. Only enter into an agreement if you are comfortable with the financial commitment and terms