Does Hire Purchase Require a Credit Check?
Does hire purchase require a credit check
The answer to this question depends on the car finance company. Some are able to offer hire purchase deals with no credit checks at all, while others will require a credit check as part of their application process. It is advisable to use a site like ClearScore to see which providers can offer you the best deal on your hire purchase, and to make sure that you have sufficient funds in order to take out a loan.
A Hire purchase (HP) agreement is an arrangement between you and a retailer, such as a garage, to buy goods in stages and then own them later on. This agreement allows you to spread the cost of buying a product over time, and it can be a useful option for people with bad credit.
There are many advantages to using a HP agreement when purchasing a new car, but it is also important to know the disadvantages. For instance, HP is usually more expensive than other forms of car finance, such as PCP or leasing.
You may also be unable to sell your car at the end of the contract if you want to recoup some of the money you spent on it, or if you have not been able to meet your monthly repayments. This is because you don’t own the vehicle until all your payments have been made and you pay a final Option to Purchase fee.
Typically, you will need to put down a deposit of 10% or more on the vehicle before it can be purchased under a HP agreement. This will be deducted from the total value of the car. The remaining amount will be paid back in instalments over the agreed term.
Your monthly payments will then be based on your deposit, the interest on the loan and any other fees associated with the contract, such as an initial registration fee and a one-off final fee to become the legal owner of the car. At the end of the agreed term, you can either choose to continue paying your instalments, or you can part-exchange the car for a newer model.
Some car dealers will even help you to fund the deposit, but this is only if you buy a car with them, and there are sometimes strings attached to these deals. This can make it difficult to get a good deal on a particular model, so it is worth shopping around before making your final decision.
It is a good idea to get a hire purchase quote before you decide which car to purchase. This will allow you to assess your options and compare them with other types of car finance, such as PCP or lease.
As a general rule, a hire purchase quote will include the annual percentage rate (APR) of the car, which is often higher than those on PCP or leasing deals. However, if you have a good credit history and can prove that you can repay the car in full by the end of the contract, then a hire purchase quote is likely to be cheaper than other types of car finance.
