Car Finance: PCP vs HP vs Loan
Compare the true total cost of PCP versus Hire Purchase for any UK car deal. Enter your deposit, monthly payments, balloon figure and term to see which option costs less overall — and exactly what you own at the end of each agreement.
Total interest to own the car
Total interest paid to own the car
All three options shown on a "to own" basis — PCP includes the balloon payment. Grey = amount financed. Coloured = interest paid on top.
What to bear in mind
PCP rates are set by the manufacturer finance arm and often look artificially low because the finance only covers a portion of the car's value — the rest is deferred as the balloon. HP and personal loan rates depend on your credit score. The APRs shown here are representative starting points — your actual offer will differ. PCP contracts also include mileage limits and condition requirements; exceeding them incurs charges on return. A personal loan lets you own the car outright from day one with no mileage restrictions and the freedom to sell at any time.
Car finance and loan providers worth considering
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Often among the best personal loan rates for good-credit borrowers. A personal loan lets you own the car outright and negotiate a cash price with the dealer — sometimes worth more than any finance deal.
Compare loansCompare personal loan rates across the full market before approaching a dealer. Knowing your loan rate gives you a benchmark — if the dealer's finance is cheaper after all, take it. If not, you have an alternative ready.
HP & PCPFinance options from multiple lenders across the AutoTrader platform. Useful for comparing HP and PCP rates directly on specific cars, rather than the manufacturer's in-house offer.
If you're comparing specific loan offers with different APRs and terms, our personal loan comparison calculator lets you model up to four offers side by side.
PCP, HP and personal loans: what you're actually signing
Most car buyers focus on the monthly payment. That's exactly what dealers and finance companies want — because monthly payment hides total cost, interest, balloon payments and the fact that you may not own the car at the end. This calculator shows you total interest, which is the honest comparison.
How PCP works
With a Personal Contract Purchase (PCP), the finance company splits the car's value into two parts. You finance the difference between the car price (minus deposit) and a Guaranteed Minimum Future Value (GMFV) — the predicted value of the car at the end of the contract. Because you're only financing a portion of the car's value, your monthly payments are lower than HP. At the end of the contract, you have three options: hand the car back (no more to pay), pay the GMFV to own it, or use any equity above the GMFV as a deposit on a new PCP deal.
Why PCP isn't always cheap
PCP looks cheap because the monthly payment is low. But if you want to own the car, you must pay the balloon — and that balloon is sometimes more than the car's actual market value at that point. Total cost to own on PCP is often higher than HP or a personal loan, especially on older or less popular models where residual values are harder to predict. The finance company sets the GMFV to ensure they profit whether you pay it or hand the car back.
How HP works
Hire Purchase (HP) is simpler. You finance the full value of the car (minus deposit), pay fixed monthly instalments, and own the car when the final payment clears. No balloon, no mileage worries, no condition inspection at the end. Monthly payments are higher than PCP because you're paying off the full amount. HP APRs from dealers tend to be slightly higher than the best personal loan rates, but the difference is often small enough not to matter for most buyers.
Why a personal loan is often the best deal
A personal loan from a bank or fintech lender often offers the lowest APR of the three options, especially for buyers with good credit. You borrow the money, pay the dealer cash, and own the car immediately — no mileage limits, no condition requirements, no need to return anything. You can also negotiate a cash discount with the dealer, since they lose the finance commission when you pay cash. That discount can easily offset any rate difference between the loan and the dealer's finance. The downside: you need to arrange the loan independently before visiting the dealer.
Mileage limits and condition — the hidden PCP cost
PCP contracts set an annual mileage allowance, typically 8,000–12,000 miles. Exceeding it costs 6–18p per mile at the end of the contract. If you do 15,000 miles a year on a 10,000-mile contract, you'll owe thousands at handback. Condition requirements (fair wear and tear standards) mean any scratches, dents or tyre wear beyond the agreed standard also incur charges. These costs don't appear in any APR comparison but they are real costs of PCP.
One practical rule
Before visiting a dealer, get a personal loan quote from a bank or comparison site. That gives you a baseline APR. If the dealer's PCP or HP offer beats it on total interest — not just monthly payment — take the dealer finance. If not, pay cash with the loan. Most buyers who do this end up with a personal loan, because dealers rarely offer rates competitive with the best bank loans for good-credit customers.
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