PCP vs HP vs Lease – Which Car Finance Should I Choose?

Spreading the cost of buying a car into monthly payments holds a lot of appeal for many motorists. It can help you to budget more effectively, as well as drive away in a car you maybe wouldn’t be able to afford outright.

There are several different options when it comes to car finance, from HP and PCP to leasing. It’s important to understand the differences between them in order to get the most out of your finance deal.

We’ve broken down the main types of car finance below, to help you choose the right one for you…

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Hire Purchase (HP)


HP finance deals guarantee ownership of the car at the end of the agreement. With HP, you’ll be able to own a car you perhaps wouldn’t be able to afford to buy with cash.

Usually you’ll pay an initial deposit followed by monthly payments over an agreed duration. Afterwards, you will own the car with no large final payment, unlike PCP. However, monthly payments will be higher.

There are no mileage limits with HP, so you can cover as many miles as you like without running the risk of getting charged extra.

If you definitely want to own the car after your agreement has ended, HP will be more cost-effective than PCP. But if you’re not sure what you’ll want to do afterwards and would rather have the freedom to decide later, a PCP deal is worth considering.

Personal Contract Plan (PCP)


PCP car finance deals are becoming more and more popular amongst car buyers; they offer lower monthly payments and more flexibility than HP deals.

Many car buyers don’t necessarily know if they will want to keep the car after their agreement has ended, trade in for a new one, or hand back the keys – a PCP deal allows you to keep your options open.

You’ll usually pay an initial deposit followed by monthly payments. A GFV (Guaranteed Future Value) is calculated before your agreement begins, which is the car’s expected value when your payments end. At which point, you’ll have three options:

Buy the car by paying the final payment

Hand the car back

Part-exchange for a new car

If you choose to buy the car by paying the final payment, PCP works out more expensive than HP. For this reason, PCP suits people who want to change their car frequently, or simply if you like the sound of low monthly payments and the freedom of options. Just be aware that going over your initial agreed mileage limit may cost you extra, as will any damages to the car.

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Leasing (PCH)


Personal leasing – or personal contract hire – is essentially renting the car for a set period. Leasing doesn’t offer the same flexibility as PCP, as there’s no option to own the car after your agreement has ended, however, you can generally expect lower monthly payments. It’s only worth considering if you’re sure you’ll want to change your car.

Mileage limits apply, and you’re liable for any damages to the car during your agreement which can cost you extra, so it’s always best to get any dents or scratches fixed promptly. If you want to end the lease early, be aware that you can be charged an early termination fee, which normally requires you to pay a minimum of half of the remaining monthly payments.

Enquire about car finance, now!


At Fleetwood Car Centre, all our staff are FCA trained and qualified to answer any questions you may have. We have access to a wide range of finance providers so you can get the best HP or PCP deal to suit you. Don’t hesitate to get in touch today or pop into our showroom for a chat with a member of our friendly team.

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