Personal Contract Purchase Vs. Hire Purchase Auto Loans

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January 27, 2012

Personal contract purchase loans are a type of car loan that many are unaware of. Many people are used to using a personal loan for their vehicle purchase. They take out the loan for the cost of the vehicle. While they owe the bank for the loan, they own the car from the beginning. Personal contract purchase loans are another way to work the loan. Hire purchase auto loans are yet another way to find a loan for a car. These two types of loans often come up when people are looking for alternative loans. For some, the personal contract purchase loan may be right. For others, the hire purchase auto loan may be best.

Personal Contract Purchase

The personal contract purchase loan is different than all other loans in terms of the fact that it could be considered a lease. The personal contract purchase loan requires that you make a high deposit. For many, this could be over 15%. After the deposit is settled, the lender will give you a GMFV number (Guaranteed Minimum Future Value). This is the settled on expected value of the car after the loan is over. At the end of the loan, you are given an option. You may pay the final amount and purchase the car, or you may simply return the car at the end of the loan.

Hire Purchase Auto Loans

Hire purchase auto loans resemble personal loans. It is important to understand the differences between the two. The hire purchase loan does not give you ownership or control of the vehicle until the final payment is made. You pay a deposit for the loan, and then pay the payments to the company that owns the vehicle. Hire purchase loans are often the loans that are used for those who wish to purchase a car.


Personal contract purchase loans have low monthly payments. These payments are lower because of the final lump sum. They also give you the benefit of choosing whether or not you purchase the vehicle in the end. Hire purchase auto loans are somewhat easy to obtain. Their main benefit is the ease of finding the loan. This is why they are some of the more popular loan types.


The personal contract purchase loan does not allow you to own the vehicle. It also means that, if you decide to not purchase the car, you lose the car. Your payments were made to rent the vehicle. The hire purchase auto loans also fail to give you ownership of the vehicle. You will not be able to sell the car on your own free will.

Not one loan is going to be better than the other in any given situation. Your own personal financial situation will help you to determine which of the two is best. Thinking about the two loans and comparing them will help you to figure out which is best. Either way, personal contract purchase loans and hire purchase auto loans should be considered when thinking about buying a vehicle.

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