The definition of an auto hire purchase loan is a loan secured through a finance company for the purchase of a car in which the buyer of the car agrees to pay back the loan over time while having the benefit of using the vehicle during the contract period. The buyer is in effect the owner, however the title of the vehicle does not transfer to the owner until the last payment is made. In essence, since the title of the car is held by the finance company, technically they are the actual owner, even though they don’t retain physical possession of the car. But the buyer is responsible for maintenance and upkeep of the vehicle as the owner, the finance company does not maintain this responsibility.
Finance companies aren’t the only ones who buyers can get an auto hire purchase loan from. A hire purchase loan (HP), could also be acquired through an auto dealership, acting as the finance company, from which the buyer purchases a vehicle. Like any other lender, they loan you the money to purchase the car with the arrangement for you to pay them back over time. A hire purchase is a loan for the full amount of the car that is spread over a specific period of time with fixed monthly payments over the life of the loan. A typical hire purchase contract is anywhere from three to five years in length. Like any other type of loan, there are terms and rates of interest applied to the principal (the purchase price), which is built into the total cost of the loan. It’s a common financial arrangement that allows buyers to finance their auto purchases at a fixed monthly payment that fits within their budget.