Website of the UK government
Please note that this website has a UK government accesskeys system.
Main menu
Page menu
Money, tax and benefits
Hire purchase and debt
You normally take out hire purchase (HP) or 'conditional sale' agreements when you buy cars or furniture. An HP agreement is a debt, and you don't actually own your goods until the debt is paid off. Until then, they belong to the person you bought them from (the creditor).
How HP differs from ordinary credit
HP agreements
- you can't sell the goods until the money's paid off
- creditors can ask you to return the goods if you don't make regular payments
Ordinary credit agreements
- you own the goods (and you can sell them)
- creditors can only ask you to pay back the money - not to return the goods
Your agreement paperwork will tell you what kind of agreement you have.
Falling behind on HP payments
If you fall behind on your payments, a creditor may ask you to return your goods. However, if you've paid more than a third of the total debt, they have to go through the County Courts first (or the Sheriff Courts in Scotland).
If you've paid less than a third of your debt, a creditor only needs a court order when they want to remove goods from your property. But this isn't necessary if they're in a public place. For example, if you have a HP agreement on your car, a creditor can remove it from the street without a court order.
If your creditor takes you to court
The courts are there to help both you and the creditor. If you can pay back the debt in reasonable instalments, the court may let you keep your goods.
If you've paid more than a third of your debt
In this case, a creditor may try to get a 'Return Order' from the court, which forces you to return your goods. However, there must be a court hearing first (probably in your local County Court).
Before the hearing, the court sends you a 'Claim Form', which gives you the chance to return the goods yourself. They'll also send you an 'admission form', which lets you:
- explain your financial situation
- make a new offer of monthly payments to the creditor
You must send the admission form back to the court within 14 days. The court then talks to the creditor to see if they'll accept your terms. If they do, the hearing is cancelled; if not, or if you don't send back the form, the hearing goes ahead.
The court then decides whether or not to enforce the Return Order or 'suspend' it (meaning it will be enforced if you miss another payment later on). If you're allowed to keep your goods, the court will set your new monthly payments.
If you don't attend the hearing, the judge usually grants the Return Order.
If you've paid less than a third of your debt
In this case, your options are to:
- ask the creditor to agree new terms (if you can afford the monthly instalment plus something toward the arrears, creditors are often willing to help)
- ask the court for a 'Time Order' (which could alter the amount you pay, the length of the loan, or the interest rate)
Ending the HP agreement yourself
In some cases, it's more realistic to end the agreement - especially if you can't make reasonable payments.
When can you end a HP agreement?
You can end a consumer HP agreement (ie not a business to business agreement) at any time before making the last token payment. (All but the final one of your payments is for rent; the final payment is split between rent and a token amount to actually buy the goods.)
How do you end a HP agreement?
You can normally do this by handing back the goods. However, creditors may ask for up to half the total figure of the original agreement (less what you've already paid) - regardless of when you end the agreement. You'll also have to pay for the arrears and any damage (such as unusual wear and tear on furniture).
Your agreement paperwork will detail any special conditions the creditor has for ending an agreement.
Once the goods are returned
If you still owe the creditor money after returning the goods, you should treat this as an ordinary debt. If you disagree with the amount, you must write to the creditor straight away.
If the creditor takes the debt to court, you'll receive a Claim Form and get the chance to state your case (as with any other debt).
Where to get advice
Many organisations, such as the ones listed here, are independent and don't charge for guidance. Always get free, independent advice before using a commercial service.
National Debtline
National Debtline offers free, confidential and independent advice on how to deal with debt for people in England, Scotland and Wales. You can call their helpline or download free fact sheets from their website.
Consumer Credit Counselling Service (CCCS)
The CCCS offers a helpline, providing free, independent and impartial advice to people with debt problems.
Citizens Advice Bureau (CAB)
Your local CAB will provide free information and advice on legal, money and other problems. You can find the address of your local office in the phone book or on their website.
More useful links
Additional links
Access keys
