PCP’s more traditional sibling, is Hire Purchase, also known as HP. Introducing it as pretty much the founding-father in the arena  of car loans is somewhat of an honour as with this introduction a milestone in the car financing world was crossed.

Prior to this existence if you didn’t have the funds for a car up front all you could do was admire the cars artistic flair from afar! Now however, with HP as a financing option amongst many you may think you are making a good buy by buying the entire product, as opposed to simply deferring ownership until a later date. The question is; are you utilising your credit effectively or are you in essence waving ‘good bye’ to it by taking out a HP agreement on a product that is guaranteed to depreciate and in effect lose you money in the term taken out?

By assessing exactly what you want from a car and more importantly what you need, the above answers can be answered. First off, is owning your vehicle at the end of term an influential factor or are you much more concerned with having affordable monthly payments? Similarly are you happy to maintain the car’s road-worthy nature are would you much rather leave such matters in the capable hands of the dealership?

Once you have sat down and deliberated over the above matters you are ready to take a closer look at the car finance family, its faces and eventually decide on which member reflects your desires for a finance agreement most fully. For those eventually settling on Hire Purchase it could be for the following reasons; ownership, if you are purchasing a luxury car or one that you don't plan on relinquishing in a short number of years then HP is by far the best option.

This is mainly because those seeking to use HP are usually of the traditional disposition where purchasing a car is a big purchase and so approach the event with a substantial deposit.

This is one of the initial ways to save money when utilising the HP finance option, as the whole amount is divided over the term, the more you can put down initially the less you'll have distributed over the rest of the term, significantly reducing your monthly re-payments.

Another way to significantly reduce your monthly payments is to increase the term, once again the amount will be divided over the entire period and if this increases your payments will exponentially decrease. A wise way to handle your credit’s infamous capability to run riot and wreak havoc on your monthly amounts of disposable income.

An element that can usually result in bad credit is the ‘bigger is better’ approach to purchases, one that is very much encouraged in the Holy land that Hire Purchase. The reason for this is the very fact that you are in effect taking out a secured loan and so companies are happy to throw larger amounts of un-earned cash in your direction.

Knowing, or hoping that you will remain honest about your addresses and your intentions for the vehicle they can retrieve the actual car which will still have its relative value, so in the event that you decide to default on one too many payments they can come and reclaim their property, sell it on and leave the arrangement with both you owing them money for defaulting and the asset, namely the car.