HP vs PCP: Which Car Financing Option Is Best for You?

So, you’ve found the car you want to buy, but now you need to decide how you want to pay for it. 

Do you pay in one lump sum? Or does spreading the cost sound more up your street?

If the latter, this blog discusses the differences between the two most popular car finance types – hire purchase and personal contract purchase – with distinct advantages, to help you in your decision. 

What is hire purchase (HP)?

Hire purchase is an agreement (typically between 12 and 60 months) where the total cost is split evenly across the agreement period. This takes away the initial fright that comes with a one-off payment, and spreads it evenly over time. 

Once all payments are made, you will own the car outright, with no further obligations or fees. 

Pros: 

• You own the car at the end
• Fixed monthly payments
• Ideal for long-term ownership

Cons: 

• Higher monthly payments
• No flexibility at the end of the term

What is personal contract purchase (PCP)?

Offering more flexible and lower payments, at the end of a PCP agreement, you can choose to pay a balloon payment to own the car, hand the car back to the dealership, or use the remaining equity as a deposit for another vehicle. 

Pros: 

• Lower monthly payments
• Flexible end-of-term options (return, buy, or part-exchange)
• Ideal for those who like to drive a new car every few years

Cons: 

• You won’t own the car outright unless you make the final payment
• Mileage restrictions are common

Key differences between HP and PCP 

There are some terms of an agreement that depend on the finance provider. However, the general differences between HP and PCP are:

Feature	HP	PCP
Ownership	You own the car at the end of the agreement	You can choose to return the car, buy it, or part-exchange it
Monthly Payments	Higher monthly payments compared to PCP	Lower monthly payments
Deposit	Typically higher	Lower deposit
End of Agreement	Own the car outright	Return the car or pay the balloon payment to own it
Flexibility	Less flexibility	More flexibility

Which one is right for you?

When choosing between car finance options, it’s important to think about what works best for you, your finances, and your lifestyle. 

If you’re using car finance to simply split the cost of a car into manageable payments, hire purchase will suit you more. 

However, if you want lower monthly payments and flexibility at the end of the agreement, PCP is the finance type for you. It’s also a good option if you like the idea of having a new car every few years. 

How Concept Car Credit can help. 

If you’re interested in owning a car using HP or PCP finance, it’s important to go through a trusted provider that considers your budget and needs at all times – like us at Concept Car Credit. 

We are finance brokers, not lenders, meaning our team can provide independent advice bespoke to you.