What happens at the end of your HP finance agreement?

If your car’s Hire Purchase (HP) finance agreement is nearly over, you have two choices for what to do next:

• You can keep the car and continue running it for as long as you wish
• You can sell the car and pocket the cash

With the recent jump in new and used car prices, you might find that the car you financed is worth a little more now than you originally planned. If so, now might be the perfect time to sell it to take advantage of its extra value. Here are your options for when your HP agreement ends.

Option 1 – Keep your car

For many buyers, the most obvious choice once they’ve completed their HP finance agreement is to continue as the car’s legal owner. With proper servicing, many cars can last for a long time after their warranties run out and, if you’ve finished making payments on your car, those extra years of motoring will really help make the most of your money.

You are free at any time to sell the car for cash, or to fund the purchase of another vehicle. On the other hand, you might choose to hang on to it for many years or pass it on to a friend or family member. Again, you are the car’s legal owner, so you get to decide what happens to it.

It’s worth being aware, however, that most cars will have fallen out of their warranty period by the end of a typical HP finance agreement. This means that, in addition to owning the car, you are also on the hook for any repairs and maintenance it requires after this point, unless you decide to pay for an extended warranty.

Pros of keeping your car after your HP deal ends

• You can keep the car indefinitely once you’ve paid off the finance, allowing you to make the most of the money you’ve spent
• You have the flexibility at any time after the agreement to sell your car
• There is no balloon payment needed to finalise the finance agreement, as you would have at the end of a PCP finance agreement

Cons of keeping your car after your HP deal ends

• You are responsible for all your car’s servicing, maintenance and MOT costs
• There is no warranty coverage
• Depreciation will affect how much your car is worth over time

Keeping your car might be the best choice if:

• You need a long-term car and don’t want ongoing finance payments
• You’re happy to keep on top of your vehicle’s maintenance schedule
• Your situation changes and you cannot afford to start a new finance agreement

Option 2 – Sell your car

The other option at the end of your HP finance agreement is to sell your car. This route will let you get the most money for your vehicle before depreciation drops its price any further. You can then use the money to fund your next car finance agreement, or put a lump sum towards a holiday or that new kitchen you keep promising yourself.

Car prices have gone up across the board recently, so lots of vehicles are now worth more than you might have originally expected.

Pros of selling your car when your HP agreement ends

• Allows you to turn your car into the most amount of cash before depreciation begins to bite
• Current high car prices mean lots of used cars are worth more than originally expected

Cons of selling your car when your HP agreement ends

• You no longer have the car, so you might have to set up a new finance agreement if you still need to drive

This might be the best choice if:

• You’ve reached the end of your finance agreement and would prefer to have the money your car’s worth rather than the car itself – maybe you want to free up the money for other things.

Coming to the end of your PCP finance agreement?

If you’re on a PCP finance agreement instead of an HP one, then check out our handy guide to your options at the end of a PCP car finance agreement.