Hire purchase and conditional sale

Summary

Hire purchase (HP) is a type of borrowing. It is different from other types of borrowing because you don’t own the goods until you have paid in full. Under an HP agreement, you hire the goods and then pay an agreed amount by instalments. While you are still making payments, you aren’t allowed to sell or dispose of the goods without the lender’s permission. If you do, you’ll be committing a criminal offence. The lender may be able to repossess (take back) the goods if you fall behind with payments. Conditional sale is similar to hire purchase. The agreement usually includes the condition that the goods don’t belong to you until you’ve paid the final instalment and the lender may be able to repossess (take back) the goods if you fall behind with payments. You can end (terminate) a hire purchase or conditional sale agreement in writing and return the goods at any time. This can be useful if you can no longer afford the payments or you don't need the goods any more. You will have to pay all the instalments due up to the time you end the agreement. If your payments come to less than half of the total price of the goods, you might still have some money to pay as the lender is entitled.

Key information

• •reduce or stop charging interest on your arrears
• •be flexible with the amount you have to pay back and how long you have to pay it
• •allow you to pay a small amount or nothing for a fixed amount of time
• •help you make a payment plan
• •Hire purchase (HP) is a type of borrowing. It is different from other types of borrowing because you don’t own the goods until you have paid in full. Under an HP agreement, you hire the goods and then pay an agreed amount by instalments. While you are still making payments, you aren’t allowed to sell or dispose of the goods without the lender’s permission. If you do, you’ll be committing a criminal offence.
• •The lender may be able to repossess (take back) the goods if you fall behind with payments.
• •Conditional sale is similar to hire purchase. The agreement usually includes the condition that the goods don’t belong to you until you’ve paid the final instalment and the lender may be able to repossess (take back) the goods if you fall behind with payments.
• •You can end (terminate) a hire purchase or conditional sale agreement in writing and return the goods at any time. This can be useful if you can no longer afford the payments or you don't need the goods any more.
• •You will have to pay all the instalments due up to the time you end the agreement. If your payments come to less than half of the total price of the goods, you might still have some money to pay as the lender is entitled to this amount under the agreement. If you have already paid more than half of the price when you end the agreement, you can't get a refund but you usually won't have to pay any more.
• •If you're not sure whether you still owe anything, check the original credit agreement. This should show the total price of the goods and the amount you must pay if you end the agreement. The credit agreement is the legal document you signed when you bought the goods.
• •Lenders sometimes say you must pay the whole amount owed under the agreement before you can end it. This is wrong. If this happens, talk to an adviser.
• •If the lender ends the agreement, for example, because you haven’t kept up with the repayments, they may be able to repossess the goods. Usually, the lender will need a court order to do this.

Practical guidance

• •Source: [Hire purchase and conditional sale](https://www.citizensadvice.org.uk/debt-and-money/borrowing-money/types-of-borrowing/hire-purchase-and-conditional-sale/)

Related topics