What is cheaper, PCP or HP?

PCP has lower monthly payments but higher total cost if you buy the car at the end. HP has higher monthly payments but you own the car outright and typically pay less interest overall.

What APR is normal for car finance?

Typical APR ranges from 0% on manufacturer deals to 5-8% for good credit. Rates above 10% are common for used cars or lower credit scores. Always compare APR, not flat rates.

Can I end car finance early?

Yes. Under the Consumer Credit Act, you can voluntarily terminate a PCP or HP agreement once you've paid 50% of the total amount payable. This includes any balloon payment for PCP.

Car Finance Calculator UK – PCP, HP & Loan Payments

PCP vs HP vs Personal Loan — What's the Difference?

The three most common ways to finance a car in the UK each work differently. PCP (Personal Contract Purchase) has lower monthly payments because you only pay off part of the car's value, with a large "balloon" payment at the end if you want to keep it. HP (Hire Purchase) spreads the full cost evenly, so you own the car outright at the end. A personal loan gives you cash to buy the car outright, often at competitive rates from banks.

Understanding PCP (Personal Contract Purchase)

PCP is the most popular form of car finance in the UK. You pay a deposit, then low monthly payments for the term (typically 2-4 years). At the end, you have three choices: pay the final "balloon" payment to own the car, hand it back with nothing more to pay, or use any equity as a deposit on your next car. The balloon payment is based on the car's predicted future value (the Guaranteed Minimum Future Value). PCP usually has the lowest monthly cost but the highest total cost if you buy the car at the end.

Understanding HP (Hire Purchase)

With HP, you pay a deposit and then fixed monthly payments that cover the entire remaining balance plus interest. Once you've made the final payment, the car is yours. There's no balloon payment and no mileage restrictions. Monthly payments are higher than PCP, but the total cost is typically lower because you're not paying interest on a deferred lump sum.

Is a Personal Loan Cheaper?

Sometimes, yes. Personal loans from banks and building societies can offer lower interest rates than dealer finance, especially if you have a good credit score. The advantage is you become a "cash buyer" at the dealership, which can give you negotiating power on the price. The downside is the loan appears on your credit file as unsecured debt, and you're personally liable for the full amount regardless of what happens to the car.

What APR Should I Expect?

Rates vary widely depending on your credit score, the car's age, and the lender. As of 2025/26, typical rates range from 0% (manufacturer subsidised deals on new cars) to around 5-8% for good credit, up to 15-20%+ for poor credit. Always compare the APR rather than the flat rate — APR includes all fees and gives you the true cost of borrowing.