Looking to buy a car on finance? Learn more about the finance products available.
Personal Contract Purchase (PCP)
No need to worry about depreciation.
Lower monthly instalments for a better car.
You are only paying for part of the total amount due and have the choice to return the car at the end of your repayment period.
You still pay monthly instalments to the finance company as with other forms of credit, but at the end of the repayment period, you can pay a lump sum, (commonly known as a balloon payment) which will be higher than the monthly repayments you have been making.
PCP enables you to pay less each month for a car of the same value than you would with a traditional HP plan.
PCP is good if:
You like to change your car frequently.
Are not bothered about owning a car outright.
Hire Purchase (HP)
Fixed monthly repayments over an agreed period as the title suggests, you hire the car from the finance company, taking responsibility for it and make monthly payments until you have paid the total amount owed.
You are the registered keeper of the vehicle throughout the payment plan and then at the end of the repayment period, you have the option to take ownership of the car.
As you will have paid off the cost of the car by this point, all you pay is a small admin fee. This could be anything from £1 – £299+.
HP is good if:
You want fixed monthly repayments.
You might like to own the vehicle long term.
Lease Purchase (LP)
Lease Purchase is a form of Hire Purchase or Conditional Sale agreement – requiring you to take ownership of the vehicle after all payments have been made – but the regular payments are structured like a lease/rental agreement.
You may be asked to pay a number of monthly payments at the start of your agreement (referred to as ‘advance payments’ and the leasing equivalent of a deposit) and a sum is usually deferred in the form of a balloon payment at the end of the term. The balloon payment will be determined by the age and mileage of the car at the end of the agreement. The difference between a Lease Purchase and a PCP agreement is that the balloon (referred to as a Guaranteed Minimum Future Value (GMFV) in a PCP deal) must be paid on a Lease Purchase agreement. With PCP, it is optional.
LP is good if:
You might like to own the vehicle long term.