What are hire purchase and conditional sale agreements?

Hire purchase (HP) agreements and conditional sale agreements usually relate to cars, although they can include furniture and household appliances.

They tend to last between one to five years.

Under HP, you don’t own the goods until you’ve made the final payment – and if you don’t keep up your payments, your creditor may be able to repossess the goods.

While you are still making payments, you aren’t allowed to sell or dispose of the goods without the lender’s permission.

What happens if I miss a payment to my hire purchase agreement?

When you miss payments, your creditor will contact you. You may be able to repay what you owe or extend the agreement if you negotiate with them. If you can’t make the full payments, they may agree to reduce the payments, but usually by a small amount and not for long.

When you miss payments before you’ve paid a third of the total amount owed, your creditor can usually take back the item.

If you have paid more than a third of the total amount you owe, your creditor will need to go through court to get the goods back. In this case, you’ll be notified of a hearing date when the court will decide whether you must return the item or accept your offer of payment.

In the event that you don’t pay back the arrears, your creditor will usually issue a default notice. Once they’ve issued the default notice, they can take action to repossess the goods.

If you’re keen to keep the goods, you must treat this debt as a priority over ordinary credit debts and offer as much as you can afford in monthly instalments. We can help you work this out.

Can I sell goods on hire purchase agreements?

Goods on HP aren’t yours to sell. You don’t own them until you’ve made the final payment.

Vehicles on HP are all recorded on a database called the HP Index which anyone can check before they buy a vehicle. So if you try to sell a vehicle on HP, no dealership will buy it from you.

When will my goods be repossessed?

Take a close look at the wording on your agreement. There’ll be a section called Repossession, where you’ll be able to find out how much you need to have paid to stop the creditor taking the goods back.

Bear in mind that your creditor can usually repossess the goods without a court order if:

• You’ve paid less than a third of the amount owed and

• The goods are not kept in your home or on private land

If you’ve paid more than a third of the agreement, or if the goods are stored on private land or inside your home, your creditor will need a court order before they can repossess them.

This means they can’t repossess household items like furniture and electrical goods without a court order, but they can take back a car.

What happens when my goods are possessed?

Your creditor will usually sell them at auction. If this doesn’t raise enough money to pay off the remaining debt, you will still owe them money. They may take further court action to get the money back from you.

I want to end the hire purchase or conditional sale agreement

If you’re not in a position to make payments and you don’t want to keep the goods, you may be able to end the agreement yourself. When you end the agreement, remember that you won’t get back any of the payments you’ve already made.

Start the process by sending a recorded delivery letter to your creditor, stating that you want to terminate and end the agreement.

There may be something left to pay after you’ve returned the goods – you should treat this like any other non-priority debt. Offer to pay it back in instalments at an amount you can afford.

Be aware that some HP agreements taken out by a business aren’t regulated by the Consumer Credit Act, and you may not have a right to end these agreements early.

Get free debt help

If you are self-employed and worried about your finances, or find yourself in the early stages of debt, we may be able to help you find a solution.

Running your own business can be lonely, especially when you’re facing money problems – we’re here to support you, by giving you free debt advice and a clear idea of your options. All you need to do is call 0800 316 1833 .