There are many similarities between Lease Purchase and Hire Purchase, but their costs vary considerably, and one might be better suited to your budget than the other.
Both contracts require you to pay a deposit followed by monthly payments, essentially working towards owning the vehicle.
Following the end of the Hire Purchase (HP) contract, you have the option to keep the vehicle. All you need to do is to pay a small ownership fee of around £100, and then the car is legally yours. Your other option is to return the vehicle to the funder. Lease Purchase requires you to make a final payment (usually about 20% of the value of the vehicle) before you become a legal owner but unlike the car HP, this form of car finance doesn't give you the option of handing the vehicle back.
Car Hire Purchase may work cheaper (if you can afford higher monthly payments) because you pay off the cost of the vehicle more quickly, and therefore pay less interest. Lease Purchase offers lower monthly payments, which might be ideal if your monthly budget is tight. On the other hand, if you decide to go for a Lease Purchase, be prepared for that big final payment.
Learn more about car leasing options below.
DIFFERENT TYPES OF VEHICLE FINANCE
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