What's cheaper: PCP, HP, or personal loan?

Personal loans typically have the lowest interest rates (5-10%) but highest monthly payments. PCP has lower monthly payments but higher total cost if you keep the car. HP is middle ground — you own the car at the end with moderate payments.

How much deposit do I need for car finance?

Typically 10-20% of the car's value. A larger deposit (20-30%) reduces monthly payments and total interest. Some 0% deals require specific deposit amounts. You can finance with no deposit, but expect higher payments.

Can I pay off car finance early?

Yes — you have the right to settle early. With HP, pay the remaining balance. With PCP, pay the remaining balance plus the balloon payment. You may save interest but check for early settlement fees (usually 58 days' interest maximum).

What APR should I expect on car finance UK?

Good credit scores get 5-9% APR. Average credit may see 10-15%. Poor credit could face 20-30%+. Manufacturer 0% deals exist but often require large deposits or forgoing discounts. Always check the total amount payable, not just APR.

Car Finance Calculator UK — PCP, HP & Loan Comparison | PocketWise

Start here: Car Costs Hub.

Understanding car finance helps you choose the best deal. Here’s how to calculate and compare your options.

Finance Types Explained

Quick Comparison

Feature	PCP	HP	Personal Loan
Own car at end	Optional (pay balloon)	Yes	Yes
Monthly payments	Lowest	Medium	Highest
Total cost	Highest if buying	Medium	Lowest
Flexibility	High	Lock in	Very high
Mileage limits	Yes	No	No
Deposit required	Typically 10%+	Typically 10%+	No

How Each Works

Finance Type	How It Works
PCP	Pay deposit + monthly payments covering depreciation, balloon payment to own
HP	Pay deposit + monthly payments covering full cost, own at end
Personal Loan	Borrow full amount, pay back with interest, own from day 1
Lease	Rent the car, return at end, never own

Monthly Payment Calculator

PCP Formula

Monthly payment = (Car price - Deposit - Guaranteed Future Value) ÷ Term months + Interest

HP Formula

Monthly payment = (Car price - Deposit + Total interest) ÷ Term months

Example: £25,000 Car

Element	PCP	HP	Loan
Car price	£25,000	£25,000	£25,000
Deposit	£2,500 (10%)	£2,500 (10%)	£0
Amount financed	£22,500	£22,500	£25,000
Term	48 months	48 months	48 months
APR	8.9%	8.9%	7.9%
Balloon (PCP)	£10,000	N/A	N/A
Monthly payment	£301	£556	£609
Total interest	£2,948	£4,188	£4,232
Total if buying	£29,948	£29,188	£29,232

Detailed Payment Tables

PCP Payments (8.9% APR)

Car Price	Deposit	Term	Balloon	Monthly	Total
£15,000	£1,500	48 mo	£5,500	£193	£17,764
£20,000	£2,000	48 mo	£7,500	£253	£23,644
£25,000	£2,500	48 mo	£10,000	£301	£29,448
£30,000	£3,000	48 mo	£12,000	£361	£35,328
£35,000	£3,500	48 mo	£14,000	£421	£41,208
£40,000	£4,000	48 mo	£16,500	£469	£46,912

HP Payments (8.9% APR)

Car Price	Deposit	Term	Monthly	Total
£15,000	£1,500	48 mo	£331	£17,388
£20,000	£2,000	48 mo	£441	£23,168
£25,000	£2,500	48 mo	£551	£28,948
£30,000	£3,000	48 mo	£662	£34,776
£35,000	£3,500	48 mo	£772	£40,556
£40,000	£4,000	48 mo	£882	£46,336

Personal Loan Payments (7.9% APR)

Loan Amount	Term	Monthly	Total Interest	Total
£10,000	48 mo	£243	£1,664	£11,664
£15,000	48 mo	£365	£2,520	£17,520
£20,000	48 mo	£487	£3,376	£23,376
£25,000	48 mo	£609	£4,232	£29,232
£30,000	48 mo	£730	£5,040	£35,040
£40,000	60 mo	£810	£8,600	£48,600

APR Impact on Payments

£20,000 Finance Over 48 Months

APR	Monthly (HP)	Total Interest	Total Cost
0%	£375	£0	£18,000
4.9%	£414	£1,872	£19,872
6.9%	£432	£2,736	£20,736
8.9%	£451	£3,648	£21,648
12.9%	£489	£5,472	£23,472
19.9%	£556	£8,688	£26,688

PCP vs HP Total Cost Comparison

Scenario: £25,000 Car, 48 Months, 8.9% APR

If You…	PCP Cost	HP Cost	Difference
Return car	£16,948	N/A	N/A
Buy car (pay balloon)	£26,948	£26,448	HP £500 cheaper
Trade in for new	Start fresh	N/A	PCP more flexible

The PCP Cycle Trap

Cycle	What Happens
End of PCP	Trade equity for new car
Repeat	Never own, always paying
10 years	Could have paid for 2 cars
Alternative	HP then own, save payments

Deposit Impact

Effect of Larger Deposit (£25,000 Car, HP, 48mo, 8.9%)

Deposit	Deposit %	Monthly	Total Interest	Total Cost
£0	0%	£612	£4,376	£29,376
£2,500	10%	£551	£3,968	£26,468
£5,000	20%	£490	£3,520	£28,520
£7,500	30%	£429	£3,092	£28,092
£10,000	40%	£367	£2,616	£27,616

Deposit Decision

Consideration	Guidance
Emergency fund	Keep 3-6 months expenses
Interest rate	If low, smaller deposit OK
Cash return elsewhere	If savings beat car APR
Negative equity risk	Larger deposit = less risk

Term Length Impact

£20,000 HP at 8.9% APR

Term	Monthly	Total Interest	Total
24 months	£914	£1,936	£21,936
36 months	£630	£2,680	£22,680
48 months	£489	£3,472	£23,472
60 months	£405	£4,300	£24,300

Trade-Off

Shorter Term	Longer Term
Higher monthly	Lower monthly
Less total interest	More total interest
Own car sooner	Longer until ownership
Less negative equity risk	More risk

Mileage Considerations (PCP)

Excess Mileage Charges

Mileage Allowance	Excess Charge
8,000 miles/year	5-15p per mile
10,000 miles/year	5-15p per mile
12,000 miles/year	5-15p per mile

Cost of Exceeding Mileage

Miles Over	At 8p/mile	At 12p/mile
2,000	£160	£240
5,000	£400	£600
10,000	£800	£1,200
20,000	£1,600	£2,400

0% Finance Deals

Reality Check

Apparent Benefit	Reality
0% APR	No interest
But often	Higher cash price
Or	Reduced part-exchange
Or	Large deposit required
Always compare	True cash price vs finance

Comparing a 0% Deal

Option	Cash Price	Finance Deal
With discount	£22,000	£25,000 at 0%
Saving	£3,000 less	£0 interest
True cost	£22,000	£25,000
Better option	Cash/loan	Pay more

Early Settlement

How It Works

Finance Type	Settlement Amount
HP	Outstanding balance + fees
PCP	Outstanding balance + balloon
Loan	Outstanding balance

Settlement Calculation Example (HP)

Element	Amount
Original loan	£20,000
Paid (24 months)	£9,792
Settlement figure	~£10,800
Includes	Remaining capital + interest rebate
Saving	Some interest avoided

Voluntary Termination (VT)

Rule	Details
Right	Return car if paid 50%
Applies to	HP and PCP
Condition	Car in good condition
Useful when	Negative equity situation

Which Finance Is Best?

Choose PCP If:

Situation	Why PCP
Want lowest payments	Only paying depreciation
Change cars often	Flexibility at end
Uncertain future	Options to return
Moderate mileage	Stay within limits

Choose HP If:

Situation	Why HP
Want to own	Car is yours at end
Keep cars long-term	No balloon to pay
High mileage	No limits
Prefer simplicity	Straightforward

Choose Personal Loan If:

Situation	Why Loan
Excellent credit	Best rates available
Want ownership immediately	No finance company lien
Flexible budget	Can afford higher payments
Cash buyer discount	Negotiate as cash buyer

Summary

Finance Type	Best For
PCP	Lower payments, flexibility
HP	Ownership, high mileage
Loan	Best rate, immediate ownership

Key Numbers	Impact
APR	Lower = cheaper
Deposit	Higher = lower monthly
Term	Longer = lower monthly but more interest
Total cost	Most important number

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