What is Hire Purchase (HP) car finance?

What it is

Hire Purchase (HP) is one of the older and more straightforward forms of UK consumer credit, and it pre-dates Personal Contract Purchase (PCP) by decades. You put down a deposit — often a cash sum, a part-exchange of an older car, or both — and then pay fixed monthly instalments, usually over two to five years. Those instalments cover the full price of the car plus interest, with nothing left to settle at the end.

On the final payment, ownership transfers from the lender to you automatically. Until that final payment lands, the lender is the legal owner of the car and you are technically hiring it — that’s the distinction that separates HP from a personal loan, where you own the car from day one and the lender only has a claim against you. HP is still common for used cars and for buyers who want to own the car outright without a large balloon payment hanging over the end of the term. Like PCP, HP is regulated under the Consumer Credit Act 1974, and the same commission disclosure rules apply to both products. There is no HP carve-out — the rules on broker commission and lender-tie arrangements bite on Hire Purchase agreements in exactly the same way they bite on PCP.

Why it matters for your claim

PCP gets most of the media attention, but HP agreements sit squarely inside the FCA’s 2026 motor finance redress scheme if they were signed between 2007 and 28 January 2021. The Discretionary Commission Arrangement (DCA) practice — where the dealer or broker raised your interest rate to earn a higher commission — was used on HP and PCP alike. If anything, HP claimants can be slightly easier to identify because the agreements were often shorter, so the credit-file traces tend to be cleaner. And owning the car outright at the end of an HP agreement does not stop you claiming on the commission you were charged during the term.