HP v PCP: how to choose your car finance
Having a car and being able to spread the cost has massive appeal for many drivers. In recent years, PCP and HP have come to dominate the car finance market, but what do these terms mean and how do you choose between them to finance your car?
What are PCP and HP?
PCP is a personal contract purchase. This is a car finance option that leaves a substantial amount owed at the end of the loan. This is the most popular type of car finance available.
HP is a conventional hire purchase agreement that divides the total amount borrowed into equal monthly payments, usually over three or four years.
With PCP, you still have a balloon payment left at the end of the agreement. This may seem painful; however, the point is that you do not have to pay off the balance at the end. You can pay it if you want to; alternatively, you can hand the car back and walk away.
PCP is not only cheaper but also matches how modern society is moving forward. Think back to when we all owned our mobile phones; today, most people pay a monthly fee for them. It is fundamentally the same thing with cars.
The beauty of PCP is its flexibility. It keeps your options open and the three choices at the end of the lease – to buy your car, hand it back or trade it in – provide peace of mind.
When to choose PCP or HP
Are you having trouble choosing which car finance plan is best for you? As with motor trade insurance from a broker such as Quotemetoday, it is best to contact an expert to see how much you could save by choosing the right car finance agreement.
Choose a PCP if having a low monthly payment is important. It is also good if you are not sure what you will do at the end of the agreement. As an added bonus, the interest rate is lower than for HP.
HP car finance is still a very viable option. Opt for HP if you know you will want to keep the car at the end of the term and the high monthly payments do not put you off.
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