Article By Eden Motor Group

PCP Vs HP Finance - Which is better for me?

So, you’ve chosen your dream car from the selection on offer at Eden. You know what colour you want, have been busy selecting just the right options and accessories and can’t wait to get it on your drive. That’s the easy – and fun - part! Now you need to work out the best way to finance it.

There are several different ways to pay for your new car and you’ll need to figure out which works best for you and your budget. It can seem bewildering, but the Eden team are here to help make it easy and talk you through the options to make an informed choice. You might even discover you can afford a better car than you thought!

Firstly, let’s look at the simplest option – paying ‘cash’. If you are lucky enough to have some money in savings or from an inheritance perhaps, you can use these funds to buy a car outright. This is of course the simplest option, but please don’t turn up at Eden with actual cash – it’s illegal for us to accept a large amount of folding money and it’s a security risk too!

While this way of paying is simple, it might not necessarily be the best for you. If there is an offer on the car’s finance at 0% for example, you may be better off leaving your savings to gather interest in a savings account of ISA and using the finance. 

Most of us will be looking to use some other form of finance however, and the most common methods are either a Personal Contract Purchase (PCP) or Hire Purchase (HP). Both make a new car more affordable. Here is how they work:​

What is Personal Contract Purchase (PCP)?

Under a PCP contract, you pay a deposit and then an agreed monthly amount for the length of the agreement, which is usually between two and four years. This payment will cover the cost of the car’s depreciation – the amount it has fallen in value while you have had it.

At the end of the term you can either hand the car back and walk away, take out a new agreement to have a new vehicle, or pay off the remaining amount of the agreement and buy it outright. This final payment is called the balloon or Guaranteed Future Value, and this can also be refinanced if you want to keep the car.

PCPs are popular as they keep monthly payments low and allow you to drive a new car every few years.

What is Hire Purchase (HP)?

Hire purchase is a simple repayment finance agreement, similar to a mortgage. They are less fashionable these days as the monthly payments are higher as you are funding the entire price of the vehicle, which means a used car on HP could actually cost more per month than a new car on a PCP or PCH.

The upside is that you will actually own it at the end of the agreement rather than having to hand it back. It is also more common for used cars, as the residual value of these can be difficult to gauge which makes them hard to put on a PCP.

Which is right for me?

In some cases the choice of finance will be based purely on your personal preference or budget, but there will also be special offers and incentives which could make different types of agreement better for you. At Eden we will be delighted to talk you through the options so you can make an informed decision.


Check out our range of new vehicles available on finance