Is a hire purchase agreement still treated as a finance lease if there is no intention of making the optional purchase payment and the asset (car) is intended to be returned at the end of the end of the agreement? (IAS17)
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"Intended to be"?
Do you mean that the hirer has no intention of keeping the car at the moment - but he can still change his mind ?
Yes, there is an optional purchase payment at the end of the term but the lessee will not want to exercise this option.
Then just treat it as a normal HP loan with a sale of the car at a price equal to the balloon payment when that actually happens.