PCP (Personal Contract Purchase)
The most popular car finance option. You pay a deposit (10-20%), low monthly payments, then at the end you choose: pay a balloon payment to own it, return the car, or trade in for a new PCP.
Pros: Lowest monthly payments, drive a newer car. Cons: Mileage limits (penalties for exceeding), you don't own the car, total cost can be higher.
Typical: £25,000 car, £2,500 deposit, £280/month for 48 months, £10,000 balloon payment.
HP (Hire Purchase)
You pay a deposit plus fixed monthly payments. You own the car once all payments are made. No balloon payment or mileage limits.
Pros: You own the car at the end, no mileage restrictions, simple to understand. Cons: Higher monthly payments than PCP, longer commitment.
Typical: £25,000 car, £2,500 deposit, £480/month for 48 months. Total paid: £25,540.
Personal Loan
Borrow from a bank and buy the car outright. You own it immediately. Often the cheapest option for buyers with good credit.
Pros: You own from day one, flexibility to sell anytime, no mileage limits, often cheapest total cost. Cons: Higher monthly payments, requires good credit for best rates.
Typical: £22,500 loan at 5%, £518/month for 48 months. Total paid: £24,864.
Which Is Cheapest?
Personal loan is usually cheapest overall, followed by HP, then PCP (if you take the balloon payment). PCP is only cheaper if you return the car — but then you own nothing.
Key Questions to Ask
What is the APR? What's the total amount payable? Are there mileage limits? What are the early settlement fees? What happens at the end?
Related Calculators
Frequently Asked Questions
Which is cheaper: PCP, HP, or personal loan?
A personal loan is usually cheapest overall due to lower interest rates. HP is next, then PCP (if you take the balloon payment to own it). PCP has the lowest monthly payments but you don't own the car.
What happens at the end of a PCP agreement?
You have three options: pay the balloon payment to own the car, return the car with nothing more to pay (if within mileage/condition limits), or trade it in for a new PCP deal on another car.