Most new and used cars in the UK are bought on finance, but the two most common options — PCP and HP — work very differently. Choosing the wrong one can cost you thousands or leave you with a car you can't afford to keep. Here's what you need to know.
With Hire Purchase, you pay a deposit (typically 10%), then fixed monthly payments over an agreed term (usually 1–5 years). At the end of the term, you own the car outright. Simple.
Monthly payments are higher than PCP because you're paying off the full value of the car, but there's no large final payment and no mileage limits to worry about.
PCP works differently. You pay a deposit, then lower monthly payments — but at the end of the term, you have a choice:
Monthly payments are lower because you're only financing the difference between the car's current value and its predicted future value — not the whole car.
Choose PCP if you like changing car every 3–4 years, want lower monthly payments, and won't exceed the agreed mileage (typically 8,000–12,000 miles/year).
Choose HP if you want to own the car outright, drive high mileage, or want the simplicity of knowing exactly when the car is yours.
Dealerships will run their own finance checks — often a hard search. Before you step into a showroom, it's worth checking your credit score and loan eligibility online. This way you know your budget, your likely rate, and you're in a stronger negotiating position.
Know your budget before you visit the dealership. Soft search — no credit impact.
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