Can’t afford to pay Hire Purchase vehicle payments

What happens when I can’t afford my hire purchase vehicle payments?In the world of business, the acquisition of company cars and vans often plays a crucial role in ensuring smooth operations and efficient mobility.

However, purchasing such vehicles outright can be a significant financial burden for many organizations.

That’s where hire purchase payments come into the picture, offering a practical solution that allows businesses to obtain the necessary transportation while spreading the cost over a period of time.

With hire purchase, companies can access the benefits of owning company vehicles without having to make a substantial upfront investment, making it an attractive option for businesses of all sizes.

But what happens if you cannot afford to make hire purchase repayments?

Understanding car hire purchase arrears

Understanding car hire or van purchase arrears is crucial for individuals or businesses who have entered into hire purchase agreements and are facing difficulties in meeting their payment obligations. Car hire or van purchase arrears occur when the borrower fails to make the agreed-upon payments on time. It’s essential to address arrears promptly to avoid further financial implications such as additional charges, penalties, or potential repossession of the vehicle.

Lenders typically have specific procedures in place for handling arrears, which may involve contacting the borrower to discuss the situation, offering repayment plans, or seeking legal recourse if necessary. It’s important to communicate openly with the lender, explain the reasons for the arrears, and work together towards a resolution that accommodates both parties

What is hire purchase?

Hire purchase is a financing arrangement that allows individuals or businesses to acquire an asset, such as a car or equipment, while paying for it in installments over an agreed-upon period. It is a popular option for those who may not have the immediate funds to make an outright purchase.

Under a hire purchase agreement, the buyer takes possession of the asset and pays a deposit upfront, followed by regular installment payments. While the buyer has full use of the asset during the payment period, legal ownership remains with the finance provider until the final payment is made.

Once all installments, including any applicable interest, are completed, ownership of the asset is transferred to the buyer. Hire purchase offers flexibility in terms of repayment plans, allowing buyers to budget their expenses more effectively while gaining access to the asset they need.

What happens when I can’t afford my hire purchase vehicle payments?

Despite the fact that you may have already paid a significant sum, the lender has the right to take back the vehicle if you don’t make your payments on time – in essence, you are renting the car under this type of arrangement.

  • The hire buy company will get in touch with you if you don’t respond to their calls. They might be willing to accept a repayment plan for the arrears that is independent from your original repayment schedule or even the extension of the current hire purchase agreement.
  • After around three months, if the arrears are still unpaid, the lender will send a default notice. This enables them to legally recover the vehicle through enforcement action.
  • After being repossessed, the car or van will be auctioned off to raise cash to pay off your obligation. They may continue to pursue legal action to recoup the unpaid balance if not enough money from the sale is available.

What can I do if I can’t afford the hire purchase car payments?

When you know you won’t be able to make a payment, it’s a good idea to let the lender know right away. This shows that you’re serious about your obligations and aren’t purposefully attempting to avoid paying.

If the company hasn’t yet sent you a default notice, you can cancel the contract and give the car back to them. This is obviously not the best course of action because you might already have made substantial progress towards paying off the vehicle and your business might suffer without one.

What else could you possibly do to improve your company’s financial status and clear any outstanding hire purchase debt?

  • Secure alternative borrowing

When it comes to settling the finance for company vehicles, exploring secure alternative borrowing options over a longer term can provide businesses with a strategic solution. While hire purchase arrangements offer a convenient method for acquiring vehicles, they often come with specific repayment periods.

However, by opting for alternative borrowing options such as business loans or asset-based financing, companies can extend the repayment period, allowing for more manageable monthly installments. These longer-term borrowing options provide stability and flexibility, enabling businesses to allocate their cash flow efficiently while ensuring the smooth operation of their fleet.

Additionally, securing the borrowing with collateral, such as existing assets or property, can offer favorable interest rates and terms, further reducing the financial strain and providing a viable pathway to settle the finance for company vehicles while preserving the company’s financial stability.

  • Seek insolvency advice

If your business finds itself in a situation where it cannot meet hire purchase payments or has experienced vehicle repossession, seeking insolvency advice becomes imperative. Insolvency professionals specialise in assessing financial distress and providing guidance on the available options to address the situation.

Seeking their expertise can help you navigate through the complexities of insolvency procedures, such as administration or liquidation, which may provide opportunities to restructure your business, negotiate with creditors, or potentially recover the repossessed vehicles.

Insolvency advice can also assist in assessing the viability of your business and exploring alternative solutions, such as refinancing or negotiating new repayment terms with lenders.

By seeking insolvency advice promptly, you can gain a clear understanding of your legal rights, obligations, and potential strategies to alleviate the financial burden, protect your business’s interests, and work towards a resolution that best serves your long-term goals.

Ending a hire purchase agreement yourself

As long as the creditor hasn’t sent you a default notice, you are free to terminate the agreement yourself at any time if you are unable to pay your HP and don’t want to keep the products. You won’t receive any of the payments you’ve already made back if the contract is terminated.

Write to the creditor to cancel the arrangement. Keep a duplicate of the letter and send it via recorded mail. You must request this in writing; if you request it over the phone, the creditor is not required to grant it.

The creditor will respond in writing and specify how they would like the things returned. They might ask you to deliver the items to a nearby store or dealership, or they might come and pick them up themselves. They can’t demand that you go far to return the items.

After you return the items, there might be a balance due. The amount you have already paid will depend on how much is still owed. Typically, there won’t be anything left to pay if you’ve already made more than half of the installments required per the arrangement.

If there is a gap, you can approach it similarly to any other non-priority obligation, such as a credit card or loan, and propose to pay it back in a number of manageable installments.

You will almost always owe less money if there is a shortfall after products are returned than if the account defaults and the creditor terminates the contract. This means that it’s advisable to take action quickly and terminate the agreement before any arrears accumulate if you know you won’t be able to afford the payments.

The Consumer Credit Act does not apply to all HP agreements, and you are not entitled to terminate them early. Older, valuable contracts or contracts signed by a business are mostly affected by this.

Frequently asked questions

What happens if I can't pay my hire purchase?

If you can't pay the hire purchase repayments the lender will end the agreement, for example, because you haven't kept up with the repayments, they may be able to repossess the goods. Usually, the lender will need a court order to do this. But if you've paid less than one third of the total amount, they don't need a court order.

Can I give my vehicle back on finance if I can't afford it?

Yes, you can give your car or van back if you can't afford the repayments if you've paid off less than 50% of the money owed, you can still return the car but will have to pay the amount owed to make up the shortfall.


In conclusion, establishing the legal position of your company vehicles in the event of repossession or failure to meet hire purchase repayments is vital for business owners. Understanding your rights and obligations can help you navigate the complexities of the situation and explore potential solutions to protect your business interests. Seeking professional advice, particularly from insolvency experts or legal professionals specialising in commercial law, can provide invaluable insights and guidance tailored to your specific circumstances.

Don’t wait until it’s too late—take action now by completing our online enquiry form. Our team of experts is ready to assist you in assessing your legal position, exploring available options, and finding the best course of action to safeguard your business and assets. Secure your company’s future by taking proactive steps today.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.