PCP vs HP - Which Car Finance Is the Best? - Essex Car Company
11.9% APR Representative. We are a credit broker, not a lender.
If you are in the market for a new car and you are planning on spreading the cost with a car finance agreement, you may find yourself overwhelmed by the different options that are available. At Essex Car Company, we have a team of car finance specialists who help our customers secure credit agreements to suit their needs and budgets every day. Here, we’ll provide a simple explanation of the main two types of car credit agreement, PCP and HP, along with the pros and cons of each, so that you can decide which is right for you.
What is PCP finance?
PCP stands for Personal Contract Purchase and with this type of agreement, you will essentially make monthly payments to your finance provider to cover the cost of the vehicle’s depreciation over the course of the agreement period. Once the agreement term ends, you will have a few options. You can either simply return the car to the lender, you can make a final ‘balloon payment’ to keep the vehicle, or you can part exchange the vehicle and get a new one.
Pros and cons
The advantage of PCP finance is that you can keep your options open, as you won’t need to decide whether or not you want to keep the car until the end of the agreement. Plus, PCP monthly payments are lower than HP payments because you are only paying toward the vehicle’s loss in value rather than its full cost.
The downside of PCP is that if you do decide to keep the vehicle, you will have to make a substantial final payment to do so, which is why it is referred to as a balloon payment. You will also need to be extra cautious with the mileage you use and any vehicle damage because if you choose to return the vehicle, these could lead to additional charges.
What is HP finance?
HP, or Hire Purchase, is slightly more straightforward. Your finance lender will loan you the entire vehicle cost minus your deposit, and you will need to pay this back in monthly instalments over a set period. Once the agreement term ends, with all the repayments made, ownership of the vehicle will be legally transferred to you.
Pros and cons
The main advantage of HP is that you will be the owner of the vehicle at the end of the agreement without having to pay a large final sum, and you won’t have to worry about extra charges for wear and tear or exceeding mileage caps.
On the flipside, the monthly instalments are higher than PCP and you won’t have the option to just return the car to the lender, although since you are the owner, you could choose to sell or part exchange it.
Where can I find used cars on finance near me?
Many local car dealerships can offer to set up finance agreements in house when you choose a vehicle from their range, so before you visit a dealer, it is worth checking to see if this is a service that they provide.
If you are looking for used car dealers in Essex, you could get a great deal on car finance Rainham at Essex Car Company! Not only do we have a huge variety of used cars in Essex to choose from, but we also strive to provide highly competitive rates on finance and we can tailor your agreement to ensure that it works for your monthly budget. If you have any questions, please contact us. Apply for car finance Essex today!