Car finance: PCP vs HP
Lesson 6 of 13 in our free Big Purchases guide: a 5-minute money game with the key points below.
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Questions you'll answer
PCP: £1,000 deposit + £199 × 36 months + £8,000 balloon to keep the car. Total cost to own it?
Quick facts
- Big optional 'balloon' payment at the end to keep the car → PCP. That's PCP.
- You own the car after the last monthly payment → HP. HP — hire purchase.
- Annual mileage limit, with charges if you go over → PCP. PCP agreements usually have mileage caps.
- Higher monthly payments for the same car → HP. Because you're paying off the whole value.
- Fact: “With PCP and HP, the car belongs to the finance company until you've paid in full.” — You can't sell it without settling the finance first.
- Myth: “You can never end a car finance deal early.” — You can settle early, and under the law you may be able to hand the car back once you've paid half the total amount owed.
- Fact: “Going over the PCP mileage limit can mean extra charges at the end.” — Usually a few pence per extra mile — which adds up.