HP Agreements Explained
Normally, when you buy goods, you own them as soon as you pay for them. With Hire Purchase (HP), you don’t own the goods until such time as you have paid all the installments on the goods. It is only then that the goods can become legally yours, and only if you decide to buy them. HP is a convenient way for people to pay for high value goods over a period of time, while still having the benefit of being able to use the goods in the interim.
Your ContractYou will have a contract with a finance company, rather than the seller who sold you the goods, and it is the finance company that ‘buys’ the goods from the seller and then hires them to you on a HP arrangement. At the end of the agreement, you can pay a further fee to buy the goods outright. HP agreements are different from Conditional Sale agreements in this respect. While HP gives you the option to buy the goods from the finance company, once all the payments are completed on a conditional sale agreement you will automatically own the goods.
Your RightsThe significant issue with HP agreements is that if you do not keep up your payments, or even if you miss one payment, the finance company can terminate the contract and take possession of the goods. In fact, HP agreements can be notoriously one sided when it comes to consumer rights. It’s very important to ensure that you have read and fully understood everything in the contract. In particular, pay attention to any penalty charges that you may incur in the event that you miss, or are late with, any payment. These can be extortionate and may be contrary to consumer legislation on the basis that the terms of the contract are unfair. If in any doubt – don’t sign until you are sure.
If you already have an HP agreement in place and are being penalized for late payments, you may wish to consult a solicitor if you think you are being treated unfairly. It’s always worth doing your sums, too: continuing with the HP agreement may end up costing you a lot more than the goods are actually worth, in which case terminating the contract (see below) may be a better option.