Car leasing: Hire purchase vs subscription

Summary

• Hire purchase is an established financing option for buying cars that involves an initial deposit and consistent monthly payments.
• Hire purchase gives you the option to own, but few options to end your contract early or change vehicles.
• Subscriptions are an increasingly popular, more flexible approach to car ownership. Simply register with Onto and you can access all the latest electric car models with just a monthly subscription fee.
• With an Onto subscription, there’s no up-front deposit, multi-year lease commitment, or extras like insurance and maintenance to add to your monthly bill, making it an easy and affordable route to having an electric car.

What is hire purchase?

Hire purchase (HP) has been a popular form of car leasing and way to finance buying a new car for decades. When you choose hire purchase, you have to arrange the agreement through the dealer or a separate broker. Some brokers can do parts of the process online, but most of it is still done in person - and with lots of tedious paperwork.

The repayment term can be anywhere from one to five years. During that time, the vehicle is legally owned by the finance company; it’s not actually yours until you make your last payment. 

So if you’re a few months into the contract and find that the car isn’t working for you, or you wish you’d gone for the one with the sunroof, you won’t be able to sell your current car or exchange it for a different model. 

And if you want to end the contract early, you’ll have to pay a penalty fee. This can be a pretty big lump sum - especially if you haven’t put much down yet. 

What is the difference between personal contract purchase (PCP) and hire purchase?

Navigating the different types of traditional leasing can be confusing.

PCP is essentially a way to lease a car with the option of ownership at the end of the lease. With a PCP lease agreement, you may make lower monthly payments than you would on hire purchase, but you’ll have a larger final ‘balloon payment’ to make to take full ownership.

With hire purchase, you’re making payments toward owning a car. Basically, you borrow the money plus interest to buy the car, then make monthly repayments until you have paid off the full value. Once you’ve made the final payment, which is usually much lower than the ‘balloon payment’ for PCP, you own the car outright. 

Hire purchase payments are calculated as the total amount borrowed divided by the number of the months in the lease term, for equal monthly payments over the three- or four-year lease term.

How does hire purchase work?  

When you buy a car on hire purchase, it usually involves:

• A complicated agreement with the financing company and lots of paperwork to fill out.
• An initial non-refundable deposit - 10% or more of the car’s value.
• A long repayment term - at least one year but up to four or five years.
• No extras included - insurance, maintenance, charging, and eventually selling the vehicle will have to be sorted by you.

What is an electric car subscription with Onto?

Car subscriptions are becoming  an increasingly popular option for drivers who want access to the latest electric vehicles without the commitment and hassles of ownership. 

Unlike traditional models of ownership and leasing, a subscription features:

• No initial deposit. When you sign up to Onto you don’t pay upfront fees. Just your monthly subscription plus a £129.50 delivery charge when you choose your first electric car.
• Competitive monthly fees - we constantly check up on rates offered by traditional leasing and PCP to ensure we’re offering our subscribers the most cost-effective option.
• Comprehensive insurance and free public charging options - a subscription with Onto is all-inclusive. We’ve made sure you have everything you need to get on the road safely and conveniently.

With Onto, there’s no paperwork or complicated sign-up process - you can get everything by visiting our website and the car is delivered to your door. 

Subscriptions run on a monthly basis. You can spend the summer cruising in a Fiat 500 Icon Convertible, then change only for £79.50  to an Audi Q4 40 e-Tron when the weather gets cooler. If you always want to be in the latest electric car that suits your lifestyle, you can with Onto.

And if you ever decide a subscription isn’t for you, you won’t have to pay any penalty fees or hidden administrative costs.

Hire purchase or subscription, simplified

See how the two options compare on all the key points.

Related articles

• Car leasing: Personal contract hire vs subscription: Personal contract hire used to be the way to drive new electric cars without committing to ownership, but subscriptions are changing everything.
• Car leasing: Personal contract purchase vs subscription: Personal contract purchase can be a way to own a new electric car - but it usually involves high monthly payments, little flexibility, and a long lease term before you have the chance to purchase the car.
• Is car leasing right for you? The questions you need to ask: Should you lease a new car? If you’re considering your options for accessing an electric car, learn more about the essential questions to ask before you sign that lease agreement - and why subscription has become an increasingly popular option.