PCP vs. HP: How Should I Finance My Used Car

11.9% APR Representative. We are a credit broker, not a lender.

Need car finance but don’t know where to start? Here at Essex Car Company we’ve got you covered, we’ll help you with some jargon busting to find a finance deal that works for you. By now we’re sure you’ll know that there is two main and most popular different kinds of finance – PCP and HP.

Finance comes in all kinds of shapes and sizes, with most people often choosing to focus on their budget and selecting a deal that suits that best, without taking note of the term of the contract. Not just that but the other factors of finance that are often overlooked are the deposit, the first and last payment, the payment terms and the APR. Before jumping head first into a finance contract these are all things you should consider.

There are a multitude of different types of finance but here we’ll focus on PCP and HP in order to explain them best to you and help you make the right decision.

Let’s start with PCP. PCP stands for Personal Contract Purchase, and it is arguably the most popular type of car finance whether it be for new or used cars in Essex. With PCP you will typically pay a deposit at the start of the contracted agreement, then the remainder of the balance will be spread out over a period of months/years, to allow you to pay the balance back. Come the end of your PCP agreement there is usually a plethora of options for you to choose from. First of all you could choose to hand the car back to the finance company and wash your hands of it and start again, or you could use your car as a deposit in part-exchange for another car. Finally you could choose to pay a balloon payment to keep the car you have grown to love. A balloon payment is a larger payment which should you choose to keep the car is payable at the end of the contract and will settle the finance for the car along with the interest charged.

Now onto HP finance. HP stands for Hire Purchase and in many ways is very similar to PCP. You will pay a deposit at the start of the agreement and then, much like PCP, the balance will be paid over a number of months. Where HP differs from PCP is the payments you make add up and mean that come the end of the agreement you will own the car. If the car you are choosing to finance is going to be you ‘long term’ or ‘forever’ car it might be worth exploring HP further.

If you’re looking for more details into PCP and HP keep an eye on the Essex Car Company website where we will go into more detail of each kind of finance. As always, if you’re looking for used cars in Essex or used car finance in Essex feel free to browse our stock or contact one of our team.