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15th March 2024

Common Misconceptions about Hire Purchase

Hire purchase is an increasingly common approach to buying a vehicle but despite its popularity, there are still several misconceptions surrounding how the process works.

So, we thought it was time to offer some clarity. If you are thinking about purchasing a new car (or van or motorcycle!) and wondering whether you should do so with the help of a hire purchase agreement, then read on as we sort the facts from the fiction.

hire purchase agreement

MYTH: It’s too complicated and involves lots of forms

You will need to provide information about your finances and identification of course but the process isn’t as laborious or time-consuming as you may think. In fact, it is usually quick and straightforward.

Credit decisions are made quickly and once agreed, the loan advance can be paid out practically straight away (subject to conditions). This means in most cases, once you have been approved, you can drive away in your chosen new car the same day.

At SMF, we can even make credit decisions on the weekends. So no waiting around when Saturday car shopping, which is when most people choose to purchase.

MYTH: It will negatively impact your credit score

Using a form of car finance, such as a hire purchase agreement, can actually help to build a credit score as long as the repayments are always made on time. It is key that payments are not missed or late ever but, depending on your circumstances, it can have the opposite effect. Demonstrating you can manage the payments can contribute to building a good credit score.

As with any form of credit, late or missed payments will have a negative impact on your score. With this in mind, it is vital to ensure you only agree to a plan which is right for you with affordable payment terms which you are confident you can meet.

MYTH: There’s no flexibility to overpay if I have some spare cash

This isn’t the case. With SMF, you can make overpayments. You just need to let us know you want to make a partial settlement to reduce the outstanding balance or the length of your agreement. Alternatively, settling the agreement in full is also an option – speak to our team for more details.

MYTH: Mileage will be limited

Depending on how much you drive, limited mileage can be a real pain. The good news is that unlike a PCP or lease agreement, your mileage is not limited with hire purchase.

Hire purchase agreements don’t come with charges for driving over a specified number of miles per year either. This can make it a more flexible option if you travel a lot or aren’t sure how many miles you will cover and don’t want to incur any surprise costs.

Wondering if a hire purchase agreement would work for you? Take a look at our frequently asked questions or more information to help you decide.