Car Finance Calculator — PCP, HP & Loan Comparison
Compare PCP (Personal Contract Purchase), HP (Hire Purchase), personal loan, and outright cash purchase for buying a car.
Car Finance Guide
PCP vs HP
Hire Purchase (HP): pay off the full car price plus interest over the term. At end: car is yours. Lower flexibility, higher monthly payments, you own the car at the end. PCP (Personal Contract Purchase): pay only the depreciation portion plus interest over the term. Final balloon payment ('Guaranteed Future Value' or GFV) if you want to keep the car. At end: 3 options — pay balloon and keep car, hand back at no cost (subject to mileage and condition), or part-exchange. Lower monthly payments but
Personal Loan vs Dealer Finance
Personal loan + cash purchase: borrow from bank/lender at potentially lower APR, then pay cash to dealer. Pros: typically lower APR than dealer finance (5-10% vs 7-12%). You own the car immediately — flexibility to sell, modify. No mileage restrictions. Stronger negotiating position with dealer (cash buyer). Cons: typically requires good credit. No 'final option' flexibility. Dealer finance pros: dealer may offer 0% APR on selected models. Convenience — done at point of sale. May come with disco
True Cost of Car Finance
Always compare TOTAL cost over the term — monthly payments alone are misleading. £25,000 car, 48-month PCP at 8.9% APR with £5,000 deposit, £10,000 GFV: monthly £320 × 48 = £15,360 + £10,000 GFV + £5,000 deposit = £30,360 total. Cash cost £25,000. Premium for financing: £5,360 over 4 years. Same car HP at 6.9% APR: monthly £495 × 48 = £23,760 + £5,000 deposit = £28,760 total. £3,760 premium — cheaper than PCP. Personal loan at 5.9% APR for £20,000: monthly £469 × 48 = £22,512 + £5,000 = £27,512.
When PCP Makes Sense
PCP works best when: you change cars every 2-4 years. Want a newer car with lower monthly payments. Don't want depreciation risk. Predictable annual mileage well within limit. PCP works poorly when: you keep cars long-term (you pay balloon eventually anyway — usually borrowed at higher APR). High annual mileage (excess mileage charges escalate fast). Plan to modify the car (typically prohibited under PCP). Don't expect changes — the car company is a partner in your asset. Negotiating: dealer pro
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