Understanding Car Finance: PCP vs HP Explained

Car finance can be confusing, so here is a plain-English overview of two common agreement types.

Personal Contract Purchase (PCP): you pay a deposit and monthly payments based on the vehicle's depreciation, with an optional final 'balloon' payment if you want to own the car outright at the end of the agreement.

Hire Purchase (HP): you pay a deposit and monthly payments that cover the full value of the vehicle, and you own it outright once the final payment is made — there is no balloon payment.

Which is right for you depends on whether you want lower monthly payments with more flexibility (PCP) or a straightforward path to ownership (HP). Always review the full terms, total cost of credit and any mileage restrictions before signing, and remember that all finance is subject to status and lender approval.