A hire purchase agreement is a method of acquiring a car on finance. It is an agreement that allows you to pay for a vehicle over a period of time. When the agreement is complete, you will own the vehicle. This article explains more about what a hire agreement is and what happens if you can not afford it.
What happens If I can’t afford the hire purchase agreement?
If you can’t afford the hire purchase agreement, your vehicle may be taken off you, as the vehicle belongs to the provider of the finance. The only way to keep it is by paying the monthly payments or by taking an alternative loan to pay the agreement off. If this is not possible then you may need someone to go through the agreement with you to see what the debt remaining maybe if the vehicle is repossessed by the finance company.
If you own a caravan, you may also have site fees and other costs to be paid whilst the caravan is on the caravan site. You may need to speak to the owners of the site to see what their policy is when site fees are in difficulty.
If you contact a free debt advice charity they would be able to go through a budgeting exercise to look at your income, daily living costs and debts to see how much is affordable to pay towards debts. Please read our article on static caravan finance for more information.
Can I transfer ownership of debt to someone else?
If you can not afford the agreement and end up in debt, the person who took out the finance contract would normally be liable for the debt. However, if the car was on a hire purchase agreement, the owner of the vehicle could terminate the agreement and return the car. This would make them liable for only 50% of the original amount.
Please note, repossession of the vehicle may be possible without taking court action. There are also times where the company may need to seek the court’s permission to repossess.
What happens to my agreement when I go bankrupt?
If the vehicle is on a hire purchase agreement there could be a clause in the terms that state that the hire purchase agreement is terminated if the purchaser becomes bankrupt. This may mean that the vehicle is repossessed by the hire purchase company or they may be happy to leave the car with you and continue to receive payments from someone else.
If the car was purchased using a hire purchase agreement then it may be that the car is owned by the hire purchase provider. This would mean that in bankruptcy the car may have no value to the bankruptcy at all and be of no interest to the Official Receiver when they are working out if you have anything that can be sold to raise money for the creditors.