PCP vs HP vs cash calculator
The lowest monthly payment is rarely the cheapest deal. This compares PCP, Hire Purchase and cash on total cost and cost of credit, so you can see what the finance really adds.
Read the total, not the monthly payment
Dealers sell on the monthly figure, and PCP nearly always shows the smallest one. It does that by deferring a large balloon payment to the end, so you finance less each month. The catch is that the balloon still carries interest across the whole term, so the cost of credit, the interest you pay in total, tends to be higher on PCP than on Hire Purchase. Cash pays no interest at all. The honest comparison is total cost to own the car, which is what this tool ranks.
Worked example
| Option | A month | Total to own | Cost of credit |
|---|---|---|---|
| PCP | £462 | £37,155 | £7,155 |
| HP | £671 | £35,190 | £5,190 |
| Cash | none | £30,000 | £0 |
On a £30,000 car with a £3,000 deposit over 48 months at 8.9% APR, and a £12,000 PCP balloon, PCP has the lower monthly payment at £462 but costs £7,155 in interest to own outright. HP costs £671 a month and £5,190 in interest. Cash is cheapest at £30,000 with no interest, the price of tying up your savings.
Common questions
What is the difference between PCP and HP?
Hire Purchase spreads the whole price over the term, and you own the car at the end. Personal Contract Purchase defers a large portion, the balloon or Guaranteed Minimum Future Value, to the end. PCP monthly payments are lower, but you only own the car if you pay that balloon, and interest is charged on the deferred amount so the total cost of credit is usually higher.
Is it cheaper to buy a car with cash?
Almost always, if you have the money and would not earn more by investing it. Cash avoids all interest, so its total cost is simply the price. The calculator shows exactly how much interest PCP and HP add on top, so you can weigh that against keeping your savings.
What is a balloon payment or GMFV?
It is the lump sum due at the end of a PCP deal to own the car outright. The finance company guarantees a minimum value, and you can pay it, hand the car back, or use any equity as a deposit on the next one. If you always hand the car back and start again, you never actually own a car.
Does a lower monthly payment mean a better deal?
Not by itself. PCP wins on monthly cost because it defers the balloon, but that deferred balance still accrues interest. Look at the total cost of credit, the interest you pay over the whole deal, not just the monthly figure. This tool puts that number front and centre.
What APR should I enter?
Use the representative APR from the finance quote, not the flat rate some dealers show, which looks lower than the true cost. If you only have the flat rate, ask for the APR, because that is what makes the three options comparable here.