PCP or HP

When it comes to purchasing a car, one of the most asked questions is “which deal is best for me?” To help you answer this question, we have explained the key differences between PCP and HP, and which deal you should opt for when buying your new car…

What is PCP?

PCP stands for “personal contract purchase,” and is the most popular method of buying a car today. In a word, it is often considered a form of hire purchase, but with smaller monthly payments (meaning that it is often more affordable for your average Joe).

However, because the monthly payments are smaller, there is often a larger amount to be repaid at the end of the agreed term (usually 3-4 years), and this is sometimes referred to as a balloon payment. This leaves the buyer with three options at the end of the deal:

1)     Find a large sum of money to purchase the car

2)     Trade the car in for a new one, with a new monthly payment plan

3)     Hand in the keys and walk away with no car

A PCP agreement is drawn up with an MGFV in mind; that is, the number of miles you expect to drive. If you exceed this limit, you will have to pay a penalty.

What is HP?

Hire Purchase (HP) is a solution that suits buyers who are certain that they will want to purchase the car in full. Simply, you put down a deposit, and then monthly repayments are calculated by the value of the car minus the deposit you put down.

Its appeal lies in the fact that at the end of the repayment period, the overall amount needed to pay will be cheaper than if bought using PCP, but naturally, the monthly repayments for this are much more expensive.

A great benefit is that there is no MGFV, so you are free to drive as far as you want (because this car is actually yours).

If you are after more flexibility with lower monthly repayments, PCP is probably the deal for you, as long as you don’t mind potentially walking away from a car that you have fallen in love with! If you need any help with car finance in Manchester, feel free to give the team here at Instant Car Credit a call where we will be happy to help.