PCP vs HP for used cars: the straight comparison
PCP and HP look similar on paper but produce very different total costs. Here's how to choose — and the trap most buyers fall into.
By Dean Griffiths · Published
How HP works (in one paragraph)
You pay a deposit (typically 10%), then equal monthly instalments over 1–5 years until the car is paid off. APR is usually slightly lower than PCP, and you own the car outright at the end. There's no mileage cap and no final balloon. Total cost over five years is straightforward to calculate: deposit + (monthly × months).
How PCP works (in one paragraph)
Same deposit, but monthly instalments only cover the depreciation over the term, not the full price. At the end you choose: (a) hand the car back and walk away, (b) pay the 'optional final payment' (the balloon, calculated as the Guaranteed Future Value) to keep it, or (c) trade equity into a new PCP. Lower monthlies, mileage cap, condition charges if the car is returned with damage.
Worked comparison — £15,000 used car, 48 months
Like-for-like at a 9% APR.
- HP: £1,500 deposit + 48 × £337 = £17,676 total. Car is yours at the end with no balloon.
- PCP: £1,500 deposit + 48 × £215 + £6,500 balloon = £18,320 total IF you keep it. Or £1,500 + 48 × £215 = £11,820 total if you hand it back. Mileage capped at 10,000/year — 8p/mile excess after that.
- Net: HP costs £640 less to keep the car. PCP costs £6,500 less if you hand it back at the end.
Pick HP if…
You're keeping the car 5+ years. You're not sure how long you'll keep it but want simplicity. You drive over the typical PCP mileage caps. You'll need to modify the car. You want clear ownership and no end-of-term decisions.
Pick PCP if…
You change cars every 3 years. You drive predictably under 10,000 miles a year. You value the lower monthly. You want the option to walk away if the car has depreciated harder than expected. You're disciplined enough to budget for the balloon if you decide to keep.
The trap most buyers fall into
Negotiating on monthly payment instead of total cost. A dealer will happily extend the PCP term from 36 to 48 months to drop the monthly £40 — and add £1,200 to your total interest bill. Always negotiate the cash price first, then ask for the finance maths on paper, then decide HP vs PCP based on YOUR mileage and ownership horizon.
The takeaway
Keeping the car long-term? Take HP — simpler, slightly cheaper if you finish the term, no end-of-deal admin. Changing every 3 years? Take PCP — but only if your real annual mileage fits the cap with margin.
Frequently asked questions
Frequently asked questions
Can I overpay a PCP?
Yes — you have a legal right to settle any regulated consumer credit early, but the lender can charge up to two months of interest as a settlement fee. Run the maths before you commit; sometimes saving and paying the balloon in full is cheaper than extending PCP.
What is voluntary termination?
If you've paid more than 50% of the total amount payable on either an HP or PCP, you have a legal right under the Consumer Credit Act 1974 to hand the car back without further charge. The car must be in 'reasonable condition' — fair wear and tear only.
Does PCP harm my credit score?
Only if you miss payments. A PCP application creates a single hard credit search; the active agreement is recorded but it's neutral as long as you pay on time. Multiple finance applications in a short period DO harm scoring.
Related guides
- The PCP trap: how to tell if a used-car finance deal is actually goodA low monthly PCP payment is designed to be attractive. Here's how to check whether the total cost is actually in your favour — or the dealer's.
- Lease vs buy used in 2026: which actually costs less in the UKPersonal leasing looks expensive on the monthly headline, but the maths against buying a 3-year-old used car is closer than most people think.
- How part-exchange works when buying a used car in the UKPart-exchange is convenient but always costs you money compared to private sale. This is how the maths actually works, when PX is worth it, and how to make sure the dealer is offering a fair number.
Used cars on finance you can buy right now
PCP, HP and personal lease from verified UK dealers. Every car DVLA-checked.
