What is the difference between PCP and HP?

HP (Hire Purchase) spreads the full car cost over monthly payments — you own the car at the end. PCP (Personal Contract Purchase) has lower monthly payments but includes a large final "balloon" payment if you want to keep the car. With PCP, you can also hand the car back or part-exchange it.

Is leasing cheaper than buying?

Leasing typically has the lowest monthly payments because you never own the car. However, you must return it at the end with nothing to show for your payments. HP and PCP cost more monthly but you either own the car (HP) or have the option to buy it (PCP).

What APR should I expect for car finance?

Dealer finance ranges from 0% (manufacturer offers) to 15%+. The average is around 6-9% APR. Your credit score significantly affects the rate offered. Personal loans from banks may offer lower rates than dealer finance for those with good credit.

What is a balloon payment?

The balloon payment (or Guaranteed Minimum Future Value) is the large final payment at the end of a PCP deal, typically 30-50% of the original car price. You only pay this if you want to keep the car. Otherwise, you hand the car back or use any equity as a deposit on your next car.

What happens if I exceed the mileage on a PCP or lease?

You will be charged for excess mileage, typically 3-12p per mile over the agreed limit. On a 3-year deal, 5,000 excess miles at 6p/mile would cost £300. It is important to set a realistic mileage limit at the start to avoid these charges.

CarCalcs

Car Finance Calculator — PCP vs HP vs Lease

Compare PCP, HP, and lease finance options to find the best deal for your next car.

Car Price

Amount in pounds sterling

Deposit

Amount in pounds sterling

Term

Term in months

Interest Rate (APR)

Interest rate as a percentage

Balloon Payment (PCP)

Final payment for PCP. Leave 0 for auto.

Annual Mileage (Lease)

Total miles driven per year

How We Calculate This

How It Works

HP: Standard amortisation of (car price - deposit) over the term at the given APR
PCP: Same as HP but with a deferred balloon payment, reducing monthly costs
Lease: Based on estimated depreciation plus a finance charge on the average value during the term

All calculations use the stated APR converted to a monthly rate. The PCP balloon defaults to 35% of the car price if not specified.

Frequently Asked Questions

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Last updated: March 2026

All calculations are estimates. Actual figures may vary based on driving conditions, vehicle specifications, and other factors.