A hire purchase agreement is a form of car finance that allows you to pay for a car in instalments, over an agreed period of time, with the option to become the legal owner at the end of the term for a small “option to purchase” fee.
Hire purchase agreements can be popular if you’re intending to own the car outright, but would like to pay for it in instalments rather than saving upfront. Equally, if you’d prefer to switch to another car at the end of the term, you have no obligation to make the purchase and can move on.
When compared to vehicle leasing deals, hire purchase agreements can be a little pricier in their monthly payments. The upside to this is that the cost to own the car at the end of the term will typically be lower than it would otherwise be with personal contract purchase (PCP) finance, making it ideal if you’re planning to own the car.
Why should you hire purchase an electric car?
If you’re looking for an affordable way to get hold of an electric vehicle, hire purchase (HP) could be the option for you. What makes this finance option special is its flexible repayment terms, that can easily fit into your budget, and its fixed interest rates. In addition to this, the deposit you pay will be relatively low—normally only 10% of the vehicle’s asking price.
You’ll find that the benefits of hire purchasing an electric car don’t end there. Other convenient features for a pure electric or plug-in hybrid car include:
- Flexible repayment terms & final instalment options.
- Low deposit.
- Fixed interest rates.
- Easier to apply for with a low credit score.
- Normally free from mileage restrictions.
- No lump sum payments.
- Free from large purchase sums.
How does hire purchase work?
In a hire purchase deal, customers put down an initial deposit and then follow up by paying a monthly sum over a fixed period of months. This is typically two or three years.
An option to consider, if you can afford it, is paying a larger deposit. The case being, that the larger the deposit put down on a hire purchase, the lower the monthly payments will be.
Once the finance is fully paid off, you, the customer, will become the legal owner of the car. However, in some cases, the transfer of ownership may involve a small fee.
If hire purchase isn’t for you, there are also a variety of different financing options, including personal contract hire and conditional sale. These may be worth exploring.
Are electric cars expensive on car finance?
Electric cars aren’t exactly the cheapest cars to buy in today’s market. However, with a mixture of government incentives and finance packages, they can become a more affordable option.
By buying an electric car on finance, the initial purchase will be much softer on your bank account. Unlike the large outlay that comes with a standard purchase, choosing a finance option, such as a hire purchase, will let you spread the cost over a longer period, giving you more room in your budget.
Why should you get an electric car?
Before purchasing a car, it is always best to make an informed decision. Take a look at these pros and cons before making your choice.
Pros of getting an electric car:
- Better for the environment: To put it simply, electric cars produce far less CO2 emissions than your standard internal combustion engine (ICE) based vehicle. Not only that, with developments in renewable energy sources and closed loop manufacturing, the creation and running of the vehicles are becoming greener too.
- Not reliant on petrol: With petrol and diesel prices continuing to rise and the UK government’s commitment to stop producing ICE based vehicles by 2030. The choice to switch from petrol to an electric motor feels like a smart one.
- A lot more charging points: The fear of an electric vehicle not having enough charge to cover the required road distance, otherwise known as ‘range anxiety’, used to be an issue for drivers looking to purchase an electric car. Nowadays this isn’t an issue. There are 1,000s of charging stations across the UK and battery life has increased to the point where there is little worry of it running out.
Cons of getting electric car
- Charging time: One thing to be aware of is charging time. On a standard home connection this can take a while. However, simply leaving it to charge overnight, will leave you with more than enough charge to get anywhere you want to go.
- Purchase price: Electric car purchase prices are still very expensive. And although the running costs are similar to that of an ICE vehicle. The initial outlay for an electric vehicle can put a lot of people off.
- Driving fun: Some may argue that electric vehicles take the fun out of driving. However with an average 0 to 60 in around 5-6 seconds, we beg to differ.
What are the most affordable types of electric car to get with a hire purchase agreement?
The most affordable electric car for you depends on what you need it for. If you need it for range, larger hatchbacks and SUVs are a good choice, as these will have bigger batteries, more power and a better driving experience.
As you will be driving at a steady speed, you will be using the battery more efficiently over the course of a longer journey. This will suit a larger vehicle that needs more power to move.
However, if you’re often driving in urban areas then a larger vehicle is not only impractical, but the stop start nature of the journey won’t suit such a large body to move around.
Smaller vehicles such as more traditional hatchbacks and ultra-minis will need less power to repeatedly stop and start. If you need a larger vehicle in these settings, then a crossover (hatchback and SUV combined) may be a more affordable option.