The Office of Fair Trading (OFT) has published a new advice leaflet for car-buyers entering into hire purchase agreements.

As well as the new leaflet, the OFT struck up an agreement with Lloyds TSB, GE Capital and Forthright Finance to make the three major car finance lenders’ consumer contracts fairer and easier to understand.

OFT chairman, Sir John Vickers, said: “Consumers purchasing on credit should think carefully about the total cost of the deal on offer and the terms of the agreement. Our leaflet will help people decide if HP is the right choice for them.”

The leaflet gives advice on shopping around for a cheaper credit deal, reading the small print carefully and helps prospective car buyers understand what their rights are.

Hire purchase (HP) is basically a form of credit whereby the car, or other item such as furniture or a computer, is the property of the lender until the loan has been paid off. The news leaflet explains how HP works and what customers need to watch out for when entering into a hire purchase deal.

Consumers usually pay lenders a deposit followed by monthly payments, repaying a proportion of the money borrowed in stages, plus interest.

Lloyds TSB provides hire purchase for individuals as well as small businesses looking to purchase vehicles and other large items.

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