Hire purchase and conditional sale

 April 2014

Fact sheet no. 16

What is hire purchase or conditional sale?

Warning:

selling hire-purchase goods

This means you cannot sell the goods yourself without the creditor’s written permission. If you sell the goods without permission it can be a criminal offence.

Nowadays hire-purchase and conditional-sale agreements usually relate to cars although they are sometimes seen for furniture and white goods. They are different from ordinary credit agreements because under hire-purchase and conditional-sale agreements you do not own the goods until you have paid off the agreement.

With hire-purchase and conditional-sale agreements, if you do not keep up with the payments it is possible for a creditor to repossess the goods. With ordinary credit agreements, the goods you buy belong to you from the time you take out the credit. The lender cannot take the goods back. They can only ask you to pay the money you owe under the agreement. 

Extra advice:

check your agreement

If you are not sure what type of agreement you have, check your contract. If it is a hire-purchase or conditional-sale agreement it will look like the example at the end of the fact sheet. Contact us for advice.

If you are not sure what type of agreement you have, check your contract. If it is a hire-purchase or conditional-sale agreement it will look like the example at the end of the fact sheet. Contact us for advice.

From April 2008, new agreements will normally be covered by the Consumer Credit Act 1974 even if you have borrowed more than £25,000, (unless the loan is for business purposes).

What if I cannot afford to pay?

Extra advice:

working out what you have paid

If you want to work out if you have paid a third or more remember to include any deposit or part exchange as well as the instalments that you have paid.

If you fall behind with your payments on a hire-purchase or conditional-sale agreement, the creditor may be able to repossess the goods. Look at your agreement. There will be a box Repossession: your rights telling you how much you need to have paid to stop the creditor taking the goods back without a court order (or your consent). This should be a third of the total amount payable under the agreement.

If you have paid a third or more of the total amount payable, the goods become ‘protected goods’ and the creditor must go to court for an order for the goods to be returned unless you consent to the repossession. They cannot just come round and remove them (‘snatch them back’).

If a creditor ‘snatches back’ goods without a court order and without your consent where a third or more has been paid, you are entitled to a refund of all the money you have paid under the agreement.

Also, even if you have not paid more than a third of the total amount payable under the agreement, the creditor will need an order from the court, or your consent, to remove the goods from ‘any premises’ they are on.

‘Any premises’ is not defined but includes your garage or drive. If your car is parked on the road (and you have not paid a third) then it is at risk of being ‘snatched back’. The law is not clear about the recovery of a car from a car park