What Is A Car Hire Purchase Loan?

A car hire purchase loan is the official term for a loan that is made with a finance company in which you don’t own the goods until the final payments are made.

How Hire Purchase Works
When you make a purchase through a hire purchase loan, the loan company or financing company (which could be the auto dealership) retains ownership of the vehicle until you make the final payment.

You would make an agreement to buy a vehicle from an individual or a dealer. Then you would go to a finance company and they would give the purchase price to the owner or the dealer on your behalf. However, they also retain the title (ownership) of the car.

You have the car in your possession, but you are not the legal owner of the car. You make payments to the finance company for an agreed upon term at an agreed upon rate of interest.

Release the Ownership
Once you have made the final payment, the loan institution releases the title to you, and you renew the title in your own name. Thus making you the new owner. Some companies charge a fee for the final title release.

Although the term “hire purchase” may sound unfamiliar, it is actually a very common method of car financing. A hire purchase loan may be the right choice for you when you purchase a car.