Free tool · Hire Purchase

Hire Purchase calculator

Estimate your HP monthly payment, the total cost of the deal, and how your loan balance compares to the car’s estimated depreciation month by month. The equity chart highlights when you’re underwater versus when selling could clear the finance.

HP deal

Your deal

Depreciation context

The car

Purchase type
New cars take the biggest hit in year 1 (VAT + dealer margin). Used cars take a smaller hit, sized by the retail markup of where you bought it. Subsequent years use the depreciation mode below.
Depreciation mode
Estimate only — real resale depends on make, model, condition, market demand and service history.

HP cost summary

Monthly payment

£447.08

Total amount paid

£23,460

Total interest

£3,460

Amount financed

£18,000

Avg monthly (all-in)

£488.74

Est. value at month 48

£10,440

Estimated depreciation over the term: 47.8% · Term: 4 years · Final payment closes the balance; ownership transfers after the last monthly instalment.

Loan balance vs estimated car value

When the car-value line sits above the loan-balance line, you're in positive equity — you could sell the car, settle the finance, and walk away with cash.

You reach positive equity at month 6. Before then, selling the car wouldn't fully cover the outstanding loan.

£0£5,000£10,000£15,000£20,000m0m12m24m36m48
  • Loan balance
  • Estimated car value

Payment schedule

Month-by-month breakdown — payment, interest charged, capital repaid, balance, and the depreciation-modelled car value.

MonthPaymentInterestCapitalBalanceCar valueEquity
1£447.08£133.50£313.58£17,686£17,000−£686
2£447.08£131.17£315.90£17,371£16,845−£525
3£447.08£128.83£318.25£17,052£16,691−£361
4£447.08£126.47£320.61£16,732£16,536−£195
5£447.08£124.09£322.98£16,409£16,382−£27
6£447.08£121.70£325.38£16,083£16,227+£144
7£447.08£119.28£327.79£15,756£16,073+£317
8£447.08£116.85£330.22£15,425£15,918+£493
9£447.08£114.40£332.67£15,093£15,764+£671
10£447.08£111.94£335.14£14,757£15,609+£852
11£447.08£109.45£337.63£14,420£15,455+£1,035
12£447.08£106.95£340.13£14,080£15,300+£1,220
13£447.08£104.42£342.65£13,737£15,141+£1,404
14£447.08£101.88£345.19£13,392£14,982+£1,590
15£447.08£99.32£347.75£13,044£14,823+£1,779
16£447.08£96.74£350.33£12,694£14,664+£1,970
17£447.08£94.15£352.93£12,341£14,504+£2,164
18£447.08£91.53£355.55£11,985£14,345+£2,360
19£447.08£88.89£358.19£11,627£14,186+£2,559
20£447.08£86.23£360.84£11,266£14,027+£2,761
21£447.08£83.56£363.52£10,903£13,868+£2,965
22£447.08£80.86£366.21£10,537£13,709+£3,172
23£447.08£78.15£368.93£10,168£13,550+£3,382
24£447.08£75.41£371.67£9,796£13,391+£3,595
25£447.08£72.65£374.42£9,422£13,257+£3,836
26£447.08£69.88£377.20£9,044£13,124+£4,079
27£447.08£67.08£380.00£8,664£12,990+£4,326
28£447.08£64.26£382.82£8,282£12,857+£4,575
29£447.08£61.42£385.66£7,896£12,723+£4,827
30£447.08£58.56£388.52£7,507£12,590+£5,082
31£447.08£55.68£391.40£7,116£12,456+£5,340
32£447.08£52.78£394.30£6,722£12,323+£5,601
33£447.08£49.85£397.22£6,324£12,189+£5,865
34£447.08£46.91£400.17£5,924£12,056+£6,132
35£447.08£43.94£403.14£5,521£11,923+£6,401
36£447.08£40.95£406.13£5,115£11,789+£6,674
37£447.08£37.94£409.14£4,706£11,677+£6,971
38£447.08£34.90£412.17£4,294£11,564+£7,271
39£447.08£31.84£415.23£3,878£11,452+£7,573
40£447.08£28.77£418.31£3,460£11,339+£7,879
41£447.08£25.66£421.41£3,039£11,227+£8,188
42£447.08£22.54£424.54£2,614£11,115+£8,501
43£447.08£19.39£427.69£2,186£11,002+£8,816
44£447.08£16.22£430.86£1,756£10,890+£9,134
45£447.08£13.02£434.06£1,322£10,778+£9,456
46£447.08£9.80£437.27£884£10,665+£9,781
47£447.08£6.56£440.52£444£10,553+£10,109
48£447.08£3.29£443.79£0£10,440+£10,440

What is hire purchase?

Hire purchase (HP) is one of the most common ways to buy a car in the UK on finance. You pay a deposit up front, then fixed monthly payments over an agreed term — usually 24 to 60 months. The finance company technically owns the car until your final payment, at which point ownership transfers to you automatically.

HP is straightforward compared to PCP: there's no large balloon payment at the end, no mileage restriction tied to a residual value, and no decision to make at the end of the term. You just keep the car.

How HP works

The maths is the same as a standard amortizing loan secured against the car:

  1. 1. Amount financed = Car price − Deposit.
  2. 2. Monthly payment = Amount financed amortized at the annual interest rate over the term in months.
  3. 3. Total cost = Deposit + Fees + (Monthly × Term).
  4. 4. Total interest = Total monthly repayments − Amount financed.

A larger deposit reduces the amount financed, which reduces both the monthly payment and the total interest paid. A longer term lowers the monthly payment but increases the total interest because you're borrowing for longer.

HP vs PCP vs personal loan

HP: deposit + monthly payments, you own the car at the end. Simple, secured against the car, repossessable if you stop paying. Best for buyers who want certainty of ownership.

PCP: deposit + lower monthly payments (because they only cover depreciation) + optional balloon payment at the end to keep the car. More flexible but more complex, with mileage limits and condition requirements at hand-back. Best for buyers who want a new car every few years.

Personal loan: borrow the full price from a bank, buy the car outright, own it from day one. Unsecured against the car, often slightly higher rates but more flexibility (no mileage limits, can sell the car at any time without settling finance). Best when personal loan rates beat the HP rate offered.

What happens at the end of the HP agreement

Once the final monthly payment clears, ownership transfers to you automatically. Some agreements charge a small "option to purchase" fee at the end (typically £100-£200) — this is the legal mechanism for the transfer and should be disclosed in the original agreement.

After ownership transfers, the car is yours to sell, modify, or keep without restriction. The HPI database will be updated to remove the "on finance" marker.

Settling HP early

Under the Consumer Credit Act 1974 you can settle the agreement early at any point. Request a settlement figure from your lender — they're required to give one within 12 working days, and the figure must reflect a statutory rebate of unused interest.

Early settlement is almost always cheaper than continuing the agreement because you save the remaining interest. The earlier in the term you settle, the larger the saving — because more of your remaining payments would have been interest.

Voluntary termination is a separate right: once you've paid at least 50% of the total amount payable (including interest), you can hand the car back and walk away with no further liability, provided the car is in reasonable condition.

How to use this calculator

  • Enter the car price. Use the full on-the-road price including VAT.
  • Enter your deposit. 10% is typical; some dealers require minimum 10-20%. Larger deposits reduce the monthly payment and total interest paid.
  • Enter fees. Documentation fees, option-to-purchase fees, and any arrangement fees the finance company charges.
  • Pick the term. Most HP terms are 36, 48, or 60 months. Try a few — see how the monthly and total interest change.
  • Enter the representative APR. This is what the finance company quotes you. The calculator shows the monthly payment, total amount paid, and how much of that is interest.

Hire purchase FAQ

What is hire purchase (HP) car finance?+

Hire Purchase is a UK car finance product where you pay a deposit, then fixed monthly instalments over a 24-60 month term. The finance company technically owns the car until the final payment clears, at which point ownership transfers to you. There is no balloon payment at the end like PCP — you simply own the car once the term completes.

How is the monthly HP payment calculated?+

The finance company takes the car price minus your deposit, applies the agreed annual interest rate, and amortizes the result over the term in equal monthly instalments. Each monthly payment is split between interest (cost of borrowing) and principal (reducing the outstanding balance). Early in the term, most of the payment is interest; late in the term, most is principal.

What's a typical APR on hire purchase?+

UK HP rates in 2026 typically range from 6-12% APR for buyers with good credit, with subprime offers reaching 15-25%. Manufacturer-backed HP deals at 0% APR exist for promotional models, but these are usually paired with reduced discounts elsewhere. Always compare the total cost paid across the full term, not just the monthly figure or the headline rate.

Can I settle my HP agreement early?+

Yes. Under the Consumer Credit Act 1974, you have a statutory right to settle early at any point. Request a settlement figure from the lender — they're required to provide one. Settlement is usually cheaper than continuing the agreement because you save on remaining interest, though some lenders charge a small early-settlement fee. The savings are largest in the early years of the agreement when most of your payment is interest.

What happens if I miss an HP payment?+

A single missed payment usually results in a late fee and a mark on your credit file. Repeated missed payments allow the lender to repossess the car, though after you've paid one-third of the total amount they need a court order. Communicate with the lender early — most will agree a payment plan rather than push for repossession.

Do I own the car during the HP agreement?+

No. The finance company is the legal owner until you make the final payment, at which point ownership transfers to you. This means you cannot sell the car without first settling the outstanding balance with the lender. The car will be marked on the HPI database as 'on finance' until settled.

Is HP better than a personal loan for buying a car?+

It depends on the rates available. A personal loan gives you immediate ownership and is unsecured — you keep the car even if you stop paying (though the lender can pursue you for the debt). HP is secured against the car, which usually means a slightly lower rate but means the car can be repossessed. If your personal loan rate is materially lower than the HP rate offered, the loan usually wins on total cost.

Can I sell a car that's on HP?+

Not without first settling the outstanding balance with the finance company. Request a settlement figure, sell the car, use the proceeds to settle, and keep any difference. Selling a car on HP without settling first is fraud — the buyer doesn't get clean title and the finance company can repossess from them. The HPI check that any sensible buyer runs will flag the outstanding finance.

This calculator is for illustrative purposes only and does not constitute financial advice. Actual HP quotes depend on the lender's underwriting, your credit profile, the specific vehicle, and additional fees not modelled here. Compare the total amount payable across offers, not just the headline rate or monthly figure.