PCP, HP, lease or cash: buying a car in the UK
The four common ways to pay for a new car in the UK, and what each one means at the end of the deal.
Monthly prices in adverts and configurators depend on which of these you choose, so compare like with like.
Cash
You pay the full price up front and own the car outright. No interest, no mileage limits, and you carry all the depreciation.
Hire purchase (HP)
You pay a deposit, then fixed monthly payments that cover the whole price plus any interest. After the last payment the car is yours. Monthly payments are higher than PCP because you're paying off the full value.
Personal contract purchase (PCP)
You pay a deposit and monthly payments that cover only part of the car's value. At the end there's a large optional final payment (often called the balloon or GFV). You can pay it and keep the car, hand the car back, or part-exchange it. PCP deals come with an annual mileage limit and condition rules, and you pay charges if you go over.
Personal contract hire (PCH, leasing)
You rent the car for a fixed term. You pay an initial rental and monthly payments, then hand it back. You never own it, and mileage and condition rules apply. Don't mix it up with PCP: with a lease there's no option to buy at the end.
Things to check
- The APR and total amount payable, not just the monthly figure.
- The annual mileage the quote assumes.
- Whether options like paint are included in the quoted price.