Hire Purchase (Vehicle Finance) Agreement Template (UK)

Updated on 9 August 2026

A UK vehicle finance arrangement is very rarely a straightforward "loan" in the US sense. The dominant structure is Hire Purchase (HP): the finance company (the "Owner" or "Creditor") remains the legal owner of the vehicle throughout the agreement, and the person acquiring it (the "Hirer") only becomes the owner once every instalment and a final option-to-purchase fee has been paid. That's a fundamentally different ownership structure from a US auto loan, where the borrower owns the car from day one subject to the lender's lien.

Where the hirer is an individual, a sole trader, or a small partnership, this is also a regulated consumer credit agreement under the Consumer Credit Act 1974, which builds in specific rights the source US-style loan document has no equivalent for: a statutory right to withdraw, a right to voluntarily terminate early for a capped payment, and — once a third of the total price is paid — a requirement that the creditor get a court order before repossessing the vehicle. This template is built around those rights rather than adapted from a US loan agreement.

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Hirer statusWhere the agreement was signed

Hire Purchase Agreement

This is a regulated consumer credit agreement under the Consumer Credit Act 1974. You have statutory rights under this Act, including rights to voluntary termination and, once you have paid enough, protection against repossession without a court order.

This Hire Purchase Agreement is dated and is entered into between , of ("Owner"), and , of ("Hirer").

1. Vehicle

Make:
Model:
Year:
Registration number:
Colour:

2. Financial disclosure

Cash price:
Deposit / part-exchange allowance:
Amount of credit:
Total charge for credit:
APR:
Total amount payable:
Option-to-purchase fee:

3. Ownership

The Vehicle remains the property of the Owner at all times until the Hirer has paid all instalments, the total charge for credit, and the option-to-purchase fee in full. The Hirer shall not sell, part-exchange, or otherwise dispose of the Vehicle as if it were their own property before that point.

4. Withdrawal right

As this agreement was signed at the Owner's or dealer's trade premises, it is not subject to the 14-day distance-signing withdrawal right.

5. Repayment

The Hirer shall pay the amount of credit and total charge for credit in instalments of each, beginning on .

6. Voluntary termination

The Hirer may terminate this agreement at any time before the final instalment falls due, by giving notice to the Owner and returning the Vehicle. On voluntary termination, the Hirer's liability is limited to the amount, if any, by which half the total amount payable exceeds the sums already paid and due, unless this agreement provides for a smaller payment.

7. Protected goods

Once the Hirer has paid one-third or more of the total amount payable, the Owner shall not repossess the Vehicle without either a court order or the Hirer's informed consent given at the time.

8. Insurance and maintenance

The Hirer shall maintain the following insurance coverage on the Vehicle throughout the agreement, and shall maintain the Vehicle in good working order:

9. Default

Before terminating this agreement or demanding early payment for a breach, the Owner shall give the Hirer written notice specifying the breach and allowing at least days to remedy it, as required for a default notice under the Consumer Credit Act 1974.

Owner

Date:

Hirer

Date:

State the disclosure figures the Consumer Credit Act actually requires

A regulated hire purchase agreement must set out the cash price of the vehicle, any deposit or part-exchange allowance, the amount of credit, the total charge for credit, the APR, the total amount payable, and the final option-to-purchase fee — together, not scattered through the document or left as a bare interest rate. This template puts them in one disclosure block at the top of the financial terms, consistent with FCA pre-contract disclosure expectations under CONC.

Keep ownership terms honest

Because the Owner retains legal title until the option-to-purchase fee is paid, the hirer has no right to sell, part-exchange, or otherwise dispose of the vehicle as if they owned it during the agreement term. This template states that plainly, rather than borrowing US-style "security interest" language that implies the hirer already owns the vehicle subject only to a lien — that's not how hire purchase works.

Check whether this is a regulated agreement

Under section 189 of the Consumer Credit Act 1974 (as amended), an "individual" for these purposes includes a sole trader and a partnership of two or three persons not all of whom are bodies corporate — but not a larger partnership or a limited company. A hire purchase agreement with a hirer in one of those individual categories is generally a regulated consumer credit agreement; one with a limited company or a larger partnership as hirer generally isn't, and the statutory rights in this template — the withdrawal right, voluntary termination, and protected-goods repossession rule — don't apply in the same way.

Build in voluntary termination and protected-goods rights

Two separate statutory protections matter here, and they're easy to conflate. Sections 99 and 100 of the Consumer Credit Act give the hirer a right to voluntarily terminate the agreement at any time before the final payment, returning the vehicle; the hirer's liability is then capped at the amount, if any, by which half the total price exceeds what's already been paid, unless the agreement sets a lower figure. Separately, section 90 makes the vehicle "protected goods" once the hirer has paid at least one-third of the total price — after that point, the creditor cannot repossess the vehicle without a court order except with the hirer's genuine, informed consent, and repossessing in breach of that rule can release the hirer from all further liability. This template states both rights rather than defaulting to a US-style self-help repossession clause, which is not how UK hire purchase default works for a regulated agreement.

Add the 14-day withdrawal right where it applies

A regulated credit agreement signed away from the creditor's (or a linked dealer's) trade premises — for example, arranged entirely online or by phone — generally carries a 14-day statutory cooling-off period during which the hirer can withdraw without penalty. An agreement signed in person at a dealership is typically not cancellable in the same way once signed, barring exceptional circumstances. This template makes the signing location an explicit field so the correct position is stated rather than assumed.

Clause-by-clause guide

Regulated agreement statement: States whether this is a regulated consumer credit agreement based on the hirer's status.
Financial disclosure: Sets out cash price, deposit, amount of credit, total charge for credit, APR, total amount payable and the option-to-purchase fee together.
Ownership: States that the Owner retains legal title until all sums and the option-to-purchase fee are paid.
Withdrawal right: States the 14-day withdrawal right where the agreement was signed away from trade premises.
Voluntary termination: States the hirer's right to terminate early under sections 99–100, capped at half the total price.
Protected goods: States that once a third of the total price is paid, the Owner needs a court order to repossess the vehicle.
Insurance and maintenance: Requires the hirer to insure and maintain the vehicle throughout the agreement.
Default: Sets out what constitutes default and the notice the Owner must give before acting on it.

UK compliance checklist

This covers agreements with an individual, sole-trader or small-partnership hirer; a limited-company or large-partnership hirer changes the position.

Confirm the FCA authorisation of the creditor
A business entering into regulated credit agreements as creditor generally needs FCA authorisation or the appropriate permission; confirm the creditor's status on the Financial Services Register before finalizing the agreement.
Check whether the hirer counts as an individual under the Consumer Credit Act
Section 189 includes sole traders and partnerships of two or three persons not all of whom are bodies corporate; a larger partnership or a limited company generally falls outside these specific protections.
Give the statutory pre-contract disclosure
FCA rules require specific pre-contract information and an adequate explanation of the agreement before a regulated credit agreement is signed.
Respect the protected-goods rule after one-third of the total price is paid
Repossessing protected goods without a court order or the hirer's informed consent can terminate the agreement and release the hirer from further liability.
Consumer Credit Act 1974, section 90
State the voluntary termination position correctly
The hirer's liability on voluntary termination under sections 99–100 is capped at half the total price less sums already paid, unless the agreement specifies a smaller amount.
Consumer Credit Act 1974, section 99

How to complete the agreement

Identify the hirer's status. Confirm whether the hirer is an individual, sole trader, small partnership or limited company.
Enter the financial disclosure. Add cash price, deposit, amount of credit, APR, total amount payable and option-to-purchase fee.
Describe the vehicle. Record make, model, year, registration and colour.
State where it was signed. Record whether the agreement was signed at trade premises or away from them, to fix the withdrawal position.
Set the instalment schedule. Add the number and amount of instalments and the first payment date.

Frequently asked questions

Who owns the vehicle during a hire purchase agreement?

The finance company (the Owner) retains legal title throughout. The hirer only becomes the legal owner once every instalment and the final option-to-purchase fee have been paid.

Can I just return the vehicle if I can't keep up the payments?

You may have a statutory right to voluntarily terminate under sections 99–100 of the Consumer Credit Act, returning the vehicle and owing at most half the total price (less what you've already paid), rather than the full remaining balance — but only for a regulated agreement, and only if you act before the final payment is due.

Can the finance company just take the car back if I fall behind?

Not once you've paid at least a third of the total price. At that point the vehicle is 'protected goods' under section 90, and the creditor needs either a court order or your genuine, informed consent to repossess it.

Is this the same as a personal loan to buy a car?

No. A personal loan gives you ownership of the vehicle from the start, subject to the lender's rights if you default. Hire purchase keeps ownership with the finance company until the agreement is paid off. They carry different rights and risks.

Do I get a cooling-off period?

If the agreement was signed away from the creditor's or dealer's trade premises — for example, arranged entirely online or by phone — you generally have a 14-day statutory right to withdraw. An agreement signed in person at a dealership is typically not cancellable in the same way.

Does this apply if my business is a limited company?

Not in the same way. The Consumer Credit Act's protections for 'individuals' extend to sole traders and partnerships of two or three people, but not to limited companies or larger partnerships, which sit outside these specific consumer-credit protections.

Related templates

Vehicle sale receipt Template (UK)

Disclaimer

This template and guide are for general information only. They are not legal or financial advice, and no solicitor, the FCA, or the Financial Ombudsman Service has reviewed or approved them. Consumer credit regulation is detailed and fact-specific; confirm the FCA authorisation, disclosure and default requirements that apply to your specific agreement before relying on this document.