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PCP vs HP Know your car finance options

One of the best ways to purchase a new car is through a finance package. Not only can you spread the cost over a set amount of months, but different options and extras can mean you end up in a much nicer car than you might be able to afford if you had to save up to pay in one lump sum. There are two main types of car finance product.

Personal Contract Purchase

Personal Contract Purchase (or PCP) is one of the most popular types of car finance product available. Instead of paying the full price of the car, you pay the depreciation in the car’s value between the start and the end of the finance agreement. This means monthly payments are generally much lower.

At the end of a PCP agreement, you have three options: you can return the car to the dealer, you can pay a final payment to own the car, or you can start a new finance package, using the existing car as part exchange.

PCP is generally only available to those with a good credit rating, so before you apply, have a look at your credit file and make sure that it’s all in good order.

Hire Purchase

Hire Purchase (or HP), is a car finance agreement where you spread the entire cost of the finance package over the monthly payments. This includes the cost of the interest across the agreement, meaning your monthly payments won’t fluctuate from month to month. Ideal for knowing exactly how much you need to budget for each month.

Hire Purchase agreements are also more readily available, meaning you don’t need such a good credit score to get a good deal. To make the most out of a hire purchase agreement, you should have a large deposit, as this will help to reduce the monthly payments into a more manageable size.

published: 09/01/2018 09:05:03

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