Is Hire Purchase car finance still fit for purpose?

Hire Purchase (HP), as a way of spreading the cost of a purchase, was conceived in England in the late 1800’s, well before the first mass-produced Model T Ford in 1908.

A hundred plus years on and we’ve seen a bit of polishing along the way, and a few variants – most recently Personal Contract Plans (PCP) – however it remains basically the same.

In an age of transparency and simplicity, it seems a bit old hat.

It’s not easily explained to a consumer that HP is car finance, not a loan, but kind of like a loan. And surely eyes have glazed over by the time it’s clear that the consumer doesn’t own the car, nor repays the finance – they pay a rental – and then the half and third rules, merchantable quality, early settlement fees and maybe what a balloon is. Seems a tough way to explain that if you buy a car on HP and you do not fully pay for it, you might need to give it back.

That got me thinking…

At the moment we have a product that somehow has survived the ages, yet seems to be unliked by both lenders and consumers. Is it still fit for purpose?

Should we just start again and create a new ‘consumer friendly’ product that is part of the car buying journey. With one click the vehicle title could pass straight from a consumer to a lender. Maybe a combination of big data, AI, and a verified digital car buying journey is the answer?

Sounding simple and transparent?

Published On: November 10, 2020
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