What is Personal Contract Purchase (PCP)?
Many used car buyers choose Personal Contract Purchase because it’s an affordable way to finance a high quality vehicle. This option means you pay for the car’s depreciation value - that is, the difference between the sale price and the Guaranteed Minimum Future Value - rather than its full cost. As such, payments are typically lower than with other purchase plans.

How does PCP actually work?​

Used car finance

After making an initial deposit, typically of around 10% of the vehicle’s value, you’ll pay fixed monthly instalments over a period of up to 48 months. When the agreement ends, you’ll have three options: you can either make a ‘balloon’ payment and become the car’s outright owner, return it with no further commitments, or to trade in for another vehicle.

What are the advantages of PCP?

PCP agreements are ideal for those without the ability to make a large deposit, as the monthly payments are often lower than on other purchase plans. They also offer the flexibility to own the vehicle, or to change it every few years.

What should you consider when option for a PCP?

Those choosing a PCP contract will be subject to mileage restrictions. The allowance is agreed at the start of the contract, meaning that any additional miles will be charged on a per mile basis. Also bear in mind that although you won’t own the vehicle, you’ll still need to maintain, tax and insure it over the course of the agreement.

Can I settle my PCP agreement early?

Yes you can. Simply obtain the settlement figure - which is the difference between what the car is worth and what you still owe - from your lender. It’s worth noting that settling early may result in negative equity. 

What is Hire Purchase (HP)?
A popular choice for those who want to purchase outright, Hire Purchase enables you to spread the cost of a vehicle over a fixed period. After paying an initial deposit, you’ll make monthly instalments to cover the balance.

How does HP actually work?​

With Hire Purchase, you’ll make a deposit of about 10% of the vehicle’s value, followed by fixed monthly instalments over a term of 12-60 months until the balance is paid off. You’ll then need to pay a small ‘Option to Purchase’ fee, normally of £100-£200, making you the vehicle’s owner.

What are the advantages of HP?

Hire Purchase enables you to purchase a vehicle without having to pay in full upfront, or make a large payment at the end of the contract. These agreements don’t come with any mileage restrictions, and if a larger deposit is made, the monthly payments will be smaller.

What should you consider when option for a HP?

If a smaller deposit is made, your monthly repayments are likely to be more than they would be for a PCP arrangement, as you’re paying off the vehicle’s full value as opposed to its depreciation cost. Despite being the owner at the end of the agreement, you do not own it while you are still making the monthly payments.

Can I settle my HP agreement early?

You can settle early by requesting a settlement figure from your finance provider. This is the outstanding balance of the vehicle plus interest. 

What is Personal Contract Hire (PCH)?
Essentially a long-term leasing agreement with monthly rental payments, Personal Contract Hire (also known as Personal Lease) enables you to drive the vehicle of your choice for a fixed period. At the end of the contract, you simply return the car to the dealer.

How does PCH actually work?​

After making a payment of around three months’ rental upfront, you’ll pay fixed monthly instalments over a period of 24-60 months. Many providers also offer a maintenance package, which can be included in your monthly payments. This covers servicing costs for the duration of the contract. When the agreement comes to an end, you’ll  hand the vehicle back without any further commitments.   

What are the advantages of PCH?

PCH agreements are a hassle-free way to drive a car you may not be able to afford to purchase. They also offer the flexibility to change your car every two to five years. 

What should you consider when option for a PCH?

PCH contracts are subject to mileage restrictions, so to avoid excess mileage charges, be sure to accurately estimate your annual mileage at the beginning of the agreement. While you’re not the owner of the vehicle, and won’t have the option to purchase it, you’ll still need to cover insurance, tax and maintenance costs.

Can I settle my PCH agreement early?

You can settle a PCH agreement early, but this may incur charges, so speak to your lender beforehand.