Both let you spread the cost of your car. PCP keeps the monthly payment lower and gives you a choice at the end; HP costs more each month and the car is simply yours when you finish. Here is how each one works, side by side, and who each suits.
You pay a deposit, then fixed monthly payments that cover the car's expected depreciation rather than its whole value, which is why they are lower than HP. At the end you choose: pay the final balloon payment and keep the car, hand it back and walk away, or trade it in towards your next one.
You pay a deposit, then fixed monthly instalments until the full value of the car has been paid. Once the last payment clears, the car is legally yours with nothing further to pay. It is the simplest way to end up owning a car outright while spreading the cost.
| PCP | HP | |
|---|---|---|
| Monthly payment | Lower: you pay the depreciation, not the whole car | Higher: you pay the whole car over the term |
| At the end | Pay the balloon, hand it back, or part-exchange | The car is yours, nothing more to pay |
| Mileage | Agreed annual limit; excess mileage charged if you hand back | No limit |
| Deposit | Optional, including zero deposit on many cars | Optional, including zero deposit on many cars |
| Settling early | Yes, with a settlement figure from the lender | Yes, with a settlement figure from the lender |
| Best for | Changing car every 2 to 4 years, keeping payments down | Keeping the car long term, high mileage, owning it outright |
The lender estimates what the car will be worth at the end of the agreement, the guaranteed minimum future value. Your deposit and monthly payments cover the difference between the price now and that value, plus interest. Because you are not paying off the whole car, the monthly figure is lower than HP on the same car over the same term.
When the agreement ends you have three options. Pay the balloon payment and the car is yours. Hand it back, provided it is within the agreed mileage and in fair condition, and owe nothing more. Or part-exchange it: if the car is worth more than the balloon, that difference becomes your deposit on the next one. Most of our PCP customers do the third.
Your deposit and monthly payments cover the full price of the car plus interest, spread over a term you choose, typically 36 to 60 months. There is no balloon and no mileage limit, so you can drive as far as you like. The lender owns the car until the final payment; after that, ownership transfers to you automatically.
HP suits people who plan to keep the car for years, who cover high mileage, or who simply want the certainty that the car will be theirs. It also tends to be the option lenders prefer for buyers with a thinner credit file, which is why it comes up often in bad credit car finance conversations.
Choose PCP if the monthly payment matters most and you like the idea of a newer car every few years. Choose HP if you want to own the car, cover a lot of miles, or would rather not have a large payment waiting at the end. If you are undecided, ask us for both figures on the car you like: every car on our forecourt can be quoted on PCP and HP, and the calculator on each car page shows both.
We are a family-run dealership on Ockendon Road in Upminster, Essex, minutes from the A127 and junction 29 of the M25, and we have been arranging finance since 1980. We work with a panel of UK lenders rather than a single bank, so we can usually find an agreement that fits, including for buyers who have been declined elsewhere. A soft-search eligibility check will not affect your credit score.
HP is usually cheaper in total if you keep the car, because you pay less interest on a balance that falls faster. PCP is cheaper month to month. If you hand a PCP car back at the end, you have paid for the depreciation and the use, not the car.
Often, yes. Our panel includes lenders who look at your current circumstances rather than only your score. HP is offered more readily than PCP to buyers with a limited credit history. See bad credit car finance.
Not always. Many of our cars are available with no deposit on either PCP or HP, subject to status. A deposit lowers the monthly payment and the total interest.
If you hand the car back you pay an excess-mileage charge per mile, set out in the agreement. If you buy the car or part-exchange it, mileage does not matter.
Yes, on both. Ask the lender for a settlement figure at any time. On PCP, settling early and part-exchanging is the normal way to change car before the end of the term.
Pick a car, open the finance calculator on its page and compare both, or ask our team to run the figures for you.