Hire Purchase (HP) is a straightforward way to buy a car on finance – you pay monthly instalments and own the car at the end. But what if your HP car turns out to be faulty? Here's your complete guide to rejecting it.
How HP Differs from PCP
With HP, you're buying the car outright – not just renting it. There's no balloon payment because you own it after the final regular instalment, and there are no mileage limits so you can drive as much as you want. Monthly payments are higher than PCP because you're paying off the full value. For rejection purposes, HP and PCP work similarly – you have rights against both the dealer and the finance company.
Your Rights When Rejecting an HP Car
The Consumer Rights Act 2015
Whether you paid cash or on finance, the Consumer Rights Act gives you the same rights: a 30-day right to reject for any fault, the right to repair or replacement after 30 days, a final right to reject if repairs fail, and up to 6 years to make a claim.
Section 75 Protection
HP agreements are credit agreements, so Section 75 of the Consumer Credit Act 1974 applies. This makes the finance company jointly liable for breach of contract (such as selling a faulty car) and misrepresentation (such as lying about the car's condition). This is powerful because you can claim against the finance company if the dealer won't help.
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Step-by-Step: Rejecting Your HP Car
Step 1: Document Everything
Before contacting anyone, photograph and video the fault, keep all receipts and paperwork, note the dates (when you purchased the car and when the fault appeared), and get a diagnostic report if possible. See our guide on gathering evidence for what else to collect.
Step 2: Inform Both Parties
Write to the dealer (they sold you the car) and the finance company (they're jointly liable) on the same day. This prevents either party trying to pass the buck.
Step 3: Make Clear You're Rejecting
Your rejection letter should state that you're rejecting the vehicle under the Consumer Rights Act 2015, describe the specific faults, explain that the car is not of satisfactory quality, set out what you want (full refund and cancellation of the agreement), and give a deadline of 14 days.
Step 4: Reference the Relevant Laws
Include Section 9 (satisfactory quality), Section 22 (right to reject within 30 days), Section 24 (right to reject after failed repair), and Section 75 (finance company liability).
Step 5: Continue Payments (For Now)
This is frustrating but important. Keep paying your HP instalments while the dispute is ongoing because stopping payments damages your credit score, the finance company could repossess the car, and it weakens your legal position. You'll get these payments back when you successfully reject.
What Happens to Your HP Agreement
When Rejection Is Successful
The agreement is cancelled as if it never existed, all payments are refunded (deposit plus all instalments), no termination fees should apply, and your credit file should show the agreement as settled, not defaulted.
What You Get Back
You get back your deposit (however you paid it), every monthly payment you've made, the interest portion of those payments, and any arrangement fees.
What You Don't Owe
You don't owe future payments because the agreement is cancelled. You don't owe an early settlement figure because you're not settling – you're rejecting. And termination fees don't apply to fault-based rejection.
HP vs Voluntary Termination
You might have heard of "voluntary termination" – this is different from rejection.
Voluntary termination is available once you've paid 50% of the total amount payable. You return the car and walk away with no refund of payments made, but the car must be in reasonable condition and no fault is required.
Rejection is available when the car is faulty. You get your money back, the car can be in poor condition (because that's why you're rejecting), and it's based on the Consumer Rights Act.
If your car is faulty, rejection is better because you get your money back. VT is only useful if you can't prove a fault but just want out of the agreement.
Dealing with the Finance Company
Why Contact Them?
Finance companies have procedures for handling disputes, are regulated by the FCA, take complaints seriously because of regulatory consequences, can pressure dealers to resolve issues, and are your backup if the dealer refuses.
What to Expect
The finance company should acknowledge your complaint within a few days, then investigate by contacting the dealer. They'll either agree to reject or make an alternative offer. If they don't resolve it, you can escalate to the Financial Ombudsman.
The Financial Ombudsman
If the finance company refuses to help, complain to the Financial Ombudsman Service (FOS). It's free to use, investigates your complaint independently, can award up to £430,000 in compensation, and its decisions are binding on the company. Finance companies actively want to avoid FOS complaints, which often motivates them to resolve disputes before it gets that far.
Common HP Rejection Scenarios
Scenario 1: Fault Within 30 Days
Best case scenario. You have an automatic right to reject. Write to the dealer and finance company, cite Section 22 (the 30-day rejection right), demand a full refund and agreement cancellation, and don't accept repair offers – you don't have to within 30 days.
Scenario 2: Fault After 30 Days But Within 6 Months
Write to the dealer and finance company, citing Section 24 (right to reject after failed repair). Allow one repair attempt, and if it fails or takes too long, reject. The law presumes the fault was present at purchase during this period.
Scenario 3: Dealer Has Gone Bust
This is where HP really helps. Contact the finance company directly – they're still liable under Section 75 and can't dismiss your claim just because the dealer has gone. Proceed as normal and they should refund you.
Scenario 4: Finance Company Refuses
Make a formal complaint to the finance company and allow 8 weeks for their final response. If they don't resolve it, escalate to the Financial Ombudsman, who will investigate and can order compensation.
What About the Car?
Don't Return It Yet
Keep the car until you've received your refund. You're not obliged to return it first.
Who Collects It?
The dealer or finance company should arrange collection at no cost to you.
What Condition?
The car doesn't need to be in perfect condition – it's faulty, that's why you're rejecting it. But don't cause additional damage.
Recommended reading
Sample HP Rejection Letter
To: [Dealer Name] and [Finance Company Name]
Re: Rejection of Vehicle – [Registration]
HP Agreement Reference: [Number]
Dear Sir/Madam,
On [date], I entered into a Hire Purchase agreement (reference above) to purchase [vehicle make, model, registration] for a total of £[amount].
Since purchase, the vehicle has developed the following fault(s):
[Describe each fault in detail]
These faults mean the vehicle is not of satisfactory quality as required by Section 9 of the Consumer Rights Act 2015.
I am therefore rejecting this vehicle under [Section 22 / Section 24] of the Consumer Rights Act 2015.
I require:
- Cancellation of the HP agreement with immediate effect
- Full refund of all payments made:
- Deposit: £[amount]
- Monthly payments: [X] x £[amount] = £[total]
- Total refund due: £[amount]
- Confirmation that the agreement will be recorded as settled (not defaulted) on my credit file
- Collection of the vehicle at no cost to me
To [Finance Company]: Under Section 75 of the Consumer Credit Act 1974, you are jointly and severally liable with the dealer for this breach of contract.
Please confirm arrangements within 14 days. If I do not receive a satisfactory response, I will escalate this matter to the Financial Ombudsman Service.
Yours faithfully,
[Your name] [Your address] [HP agreement number] [Vehicle registration]
The Bottom Line
HP gives you the same rejection rights as cash purchases, with the added bonus of Section 75 protection through the finance company. Contact both the dealer and finance company simultaneously – this shows you know your rights and prevents either party from passing the buck. Keep paying your instalments until the dispute is resolved, because you'll get all of it back on a successful rejection. The finance company is jointly liable and can't dismiss your claim, and the Financial Ombudsman is free to use and has real power to help if they refuse. If your car is faulty, rejection is always better than voluntary termination because you get your money back instead of just walking away.
Got a faulty HP car? Check if you qualify for our rejection service. We'll handle the paperwork for both the dealer and finance company.
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