How to Refinance Existing Hire Purchase at a Lower Rate
Finn Murphy
Relationship Manager · May 5, 2026 · 6 min read
Hire purchase and asset finance agreements can often be refinanced at a lower rate, particularly if the original agreement was arranged during a period of higher rates, the business's financial profile has improved since the original application, or a significant amount of the original term remains. Knowing when and how to refinance can save meaningful amounts over the remaining life of the agreement.
When refinancing makes financial sense
Refinancing an existing HP agreement makes sense when the interest rate on the new facility is materially lower than the existing rate, and the saving outweighs the cost of exiting the existing agreement. Most HP agreements carry an early termination charge, commonly a percentage of the outstanding balance or a number of months' interest. Calculate the break-even point: how many months of lower repayments are needed to recover the exit cost?
It also makes sense when the business needs to free up cash flow and extending the term of the asset finance (even at a similar rate) would reduce monthly payments enough to make a material difference. Refinancing to a longer term increases total interest paid but can be the right trade-off if the business is under short-term cash flow pressure.
How to check your existing agreement terms
Your HP agreement will specify the settlement figure (the amount required to pay off the agreement on a given date) and any early repayment charges. Request a settlement figure from your current lender as of a specific date. This tells you exactly what it will cost to exit. Compare this to the total interest saving from refinancing at a lower rate over the remaining term.
Some agreements have a minimum term before refinancing is permitted. Others have redemption penalties that reduce over time (for example, a declining percentage charge over the first three years). Knowing these terms means you can time a refinancing exercise for when it becomes financially worthwhile.
"Many businesses are paying above-market rates on agreements arranged years ago because reviewing existing finance feels like an extra task. It rarely takes more than a day of work and the savings are often worth far more."
- Finn Murphy, Relationship Manager, Spark Finance
The refinancing process
To refinance, a new lender will assess the asset (to confirm its current value and condition), the business's financial profile (bank statements, filed accounts), and the existing agreement terms. If approved, the new lender pays the settlement figure to your existing lender directly, and you begin making lower payments to the new lender from the following month.
The process typically takes 2-5 business days for straightforward refinancing of vehicles, plant, and machinery. For higher-value or more complex assets, it may take slightly longer. Spark Finance manages the whole process, from obtaining settlement figures and approaching lenders through to coordinating the settlement and drawdown.
What the savings can look like
As an example: a business with a 150,000 pound balance remaining on a hire purchase at 9 percent APR with 36 months remaining is paying approximately 4,769 pounds per month. Refinancing to a rate of 6.5 percent APR for 36 months reduces the monthly payment to approximately 4,572 pounds, saving 197 pounds per month and 7,092 pounds over the remaining term, minus any exit cost from the original agreement.
These savings are more significant for larger balances and longer remaining terms. A fleet of vehicles or a portfolio of machinery on above-market-rate agreements can represent a substantial saving opportunity when refinanced to current market rates.
The bottom line
Spark Finance can review your existing HP and asset finance agreements, calculate potential refinancing savings, and arrange replacement facilities at current market rates. Apply at apply.sparkfinance.co.uk to start the review.
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