daytics™
Results are estimates for guidance only and do not constitute financial advice. Always consult a qualified professional.
daytics is free. Help keep it that way.
Built by one person. No sign-ups, no paywalls, no newsletter spam. If a tool saved you time, a coffee goes a long way.
How to Use the HP Calculator
- Enter the car price — the full on-the-road price of the vehicle.
- Enter your deposit — the cash or trade-in value you're putting down. Most HP lenders require at least 10%.
- Set the term — HP agreements typically run 24, 36, 48, or 60 months. Longer terms reduce the monthly but increase total interest.
- Enter the APR — the representative rate quoted by the lender, inclusive of mandatory fees.
- Click "Calculate" — see your monthly HP payment, total repayable, and total interest charged.
What is Hire Purchase (HP)?
Hire Purchase is the most straightforward form of UK car finance. You pay a deposit, then fixed monthly instalments over a set term, and at the end of the term — once you've paid a nominal "option to purchase" fee (usually £0 to £150) — the car is yours to keep. HP is secured against the vehicle: if you miss payments, the lender can repossess it. That security is why HP typically carries lower APRs than unsecured personal loans, sometimes by 1 to 3 percentage points on equivalent credit profiles.
The maths behind an HP payment is the standard amortisation formula: M = P × r × (1+r)^n / ((1+r)^n − 1), where P is the amount financed (car price minus deposit), r is the monthly interest rate (APR ÷ 12), and n is the number of months. The formula produces a fixed monthly payment that covers both interest and capital. In the early months, most of each payment goes toward interest. By the end of the term, most goes toward capital. The total interest you pay is (monthly × n) minus the amount financed.
HP vs personal loan: which is cheaper?
For most UK borrowers, HP is cheaper than a personal loan for the same amount, term, and credit profile. A 48-month HP on £15,500 at 8.9% APR produces a monthly payment of about £384. The equivalent unsecured personal loan at 10.9% APR (roughly 2 points higher for the same borrower) would be about £399 per month — £720 more over the full term.
Personal loans win on flexibility. Because the loan isn't secured against the car, you can sell the car at any point without settling the finance agreement — handy if your circumstances change. You also don't have to worry about repossession; a missed payment hits your credit file but doesn't put the car at immediate risk. And you can borrow more than the car costs — useful if you want to wrap insurance, tax, or a service plan into the deal.
HP wins on APR and predictability. Fixed monthly payments for the full term, no end-of-term balloon surprise, and you own the car outright on completion. For buyers who know they want to keep the car long-term, HP is almost always the lowest-cost route short of buying with cash.
How much deposit should you put down on HP?
Most HP lenders require a minimum 10% deposit, but putting down more has three effects: it lowers the monthly payment, it reduces the total interest paid, and it often unlocks a better APR band. A deposit of 20% or more typically moves you into a more favourable risk tier with most UK lenders. On a £18,000 car, moving from a 10% deposit to a 25% deposit at 8.9% APR over 48 months saves about £1,450 in total interest.
That said, a deposit is only worth putting down if the money would otherwise sit in a savings account earning less than the APR after tax. With 2026 savings rates around 4.5% AER and HP APRs around 8% to 10%, any cash you can divert from savings to deposit is almost always worth it. But if you're emptying your emergency fund to boost the deposit, don't — the cost of being caught out by an unexpected bill and having to borrow at a higher rate usually outweighs the interest saving on the car.
What happens if you default on HP?
HP is secured against the vehicle, so the lender's primary recourse for missed payments is repossession. However, the Consumer Credit Act provides significant protection. Once you've paid a third or more of the total amount payable, the lender cannot repossess the car without a court order. That's a legal line called "protected goods" status. Before that point, the lender can still repossess the car if it's on public property (not in your garage or driveway), but they must give you a default notice and at least 14 days to catch up first.
If you're struggling to make payments, talk to the lender early. Most will agree to a payment holiday, a reduced payment period, or a term extension that keeps the agreement on track. You also have the right to Voluntary Termination (VT) under Section 99 of the Act once you've paid 50% of the total amount payable — hand the car back, pay any mileage or damage excess, and walk away with no further liability. VT is a legal right, not a favour, and done correctly it doesn't damage your credit score the way a default does.
Early settlement: can you pay off HP sooner?
Yes. Under the Consumer Credit Act you have the right to settle an HP agreement early at any time. The lender must provide an early-settlement figure showing the remaining capital plus a rebate on future interest. The maximum early-settlement charge is capped at 58 days' interest on the outstanding balance, which usually works out at less than one regular monthly payment on a typical deal.
Partial early repayment — paying a lump sum to reduce the balance without settling entirely — is also available on most HP agreements. Check the finance agreement for the minimum lump sum (typically £1 or £500), and confirm whether the overpayment reduces the term or the monthly payment. Reducing the term saves the most interest.
How is an HP monthly payment calculated?
HP monthly payments use the standard amortisation formula: M = P × r × (1+r)^n / ((1+r)^n − 1), where P is the amount financed (car price minus deposit), r is the monthly interest rate (APR ÷ 12), and n is the number of months. This produces a fixed payment that covers both interest and capital, ensuring the full loan is cleared by the end of the term.
Do I own the car during an HP agreement?
No. During an HP agreement, the lender owns the car — you are hiring it with an option to purchase at the end. You cannot sell the car without first settling the finance in full. Once you've made the final monthly payment and paid the option-to-purchase fee (typically £0 to £150), ownership transfers to you.
What's the difference between HP and PCP?
HP spreads the full cost of the car over fixed monthly payments, and you own it outright at the end. PCP has lower monthly payments because you only finance the depreciation, but there's a large final balloon payment if you want to keep the car. HP is simpler and cheaper overall if you plan to keep the car; PCP is more flexible if you change cars every 3-4 years.
Can I pay off HP early?
Yes. Under the Consumer Credit Act you can settle HP early at any time. The lender provides a settlement figure including the outstanding capital and a rebate on future interest, with a maximum early-settlement charge of 58 days' interest. Partial early repayments are also available on most agreements.
What happens if I miss HP payments?
Once you've paid a third of the total amount payable, the car has "protected goods" status and the lender needs a court order to repossess it. Before that point, the lender must serve a default notice giving at least 14 days to catch up. If you're struggling, contact the lender immediately — most will agree to a payment holiday or payment plan.
How much deposit is required for HP?
Most UK HP lenders require a minimum 10% deposit, though some accept 0% deposits at higher APRs. A 20% or larger deposit typically unlocks better APR bands with most lenders. Using a trade-in car as deposit counts the same as cash.
Is HP cheaper than a personal loan?
Usually yes. Because HP is secured against the vehicle, lenders can offer lower APRs — typically 1 to 3 percentage points below equivalent unsecured personal loans. On a £15,000 car over 48 months, that APR difference typically saves £500 to £1,500 in total interest.
Can I get HP with bad credit?
Yes, specialist subprime lenders offer HP to customers with poor credit, though APRs are typically 20% to 35% rather than the 6% to 12% available to prime borrowers. A larger deposit and a guarantor improve approval chances. HP is often easier to get than PCP for bad-credit customers because the lender's security in the vehicle is simpler to enforce.
Ready to find car finance?
Compare car finance deals from UK lenders:
* External link. Daytics may earn a commission if you apply through this link.
