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Car Finance Calculator UK 2026

Compare PCP, HP and Personal Loan monthly payments. See total interest, ownership costs and the cheapest option for your budget.

PCP (Personal Contract Purchase)

HP (Hire Purchase)

Personal Loan

Compare All Three Options

Uses values entered in PCP, HP and Loan tabs. Fill in those first and calculate each one before comparing.

Calculate PCP, HP and Loan first to see comparison.

UK Average Car Prices 2026

CategoryAverage PriceTypical Finance APRMonthly (36m, 10% deposit)
New car (average)£30,0006-10% APR~£650-750/mo (PCP)
Used car (average)£16,00010-18% APR~£350-420/mo (HP)
Budget used (<5yr)£8,000-12,00014-22% APR~£200-300/mo
Premium new£45,000+5-8% APR~£750-1000/mo (PCP)
Electric (new)£35,0005-9% APR~£500-650/mo (PCP)

PCP vs HP vs Personal Loan: Which Should You Choose?

PCP (Personal Contract Purchase)

PCP is the most popular UK car finance. You pay a deposit, then monthly payments covering only the depreciation on the car (not the full value). At the end, you have three options: (1) Return the car - you owe nothing more, (2) Buy the car by paying the Guaranteed Future Value (GFV/balloon payment), or (3) Part-exchange and use any equity towards a new PCP. Monthly payments are lowest of the three options but you never automatically own the car.

Best for: People who like changing cars every 2-4 years, value lower monthly payments, and don't drive excessively over their agreed mileage.

HP (Hire Purchase)

HP is straightforward: deposit plus fixed monthly payments covering the full car cost plus interest. At the end of the term, you automatically own the car - no balloon payment required. Monthly payments are higher than PCP because you're paying for the whole car. Interest rates on HP are often slightly higher than PCP from manufacturers.

Best for: People who want to own the car at the end, keep cars long-term, drive high mileage, or want simple predictable payments with guaranteed ownership.

Personal Loan

A personal loan from a bank or building society is often the cheapest way to finance a car purchase. You own the car outright from day one (unlike HP/PCP where the finance company technically owns it). Loans above £7,500 can attract rates as low as 5-7% APR - significantly lower than dealer finance. The car can be used as a backup to secure the loan in some cases.

Best for: Those with good credit who want the lowest total cost, want immediate ownership, or are buying from a private seller where dealer finance isn't available.

Early Settlement

Under the Consumer Credit Act 1974, you can settle any regulated car finance agreement early. The lender can charge up to 58 days' interest as an early settlement fee. Request a settlement figure in writing - the lender must provide this within 7 days. For PCP, you can also use the "Voluntary Termination" right once you've paid 50% of the total amount payable.

GAP Insurance

GAP (Guaranteed Asset Protection) insurance covers the difference between your car insurance payout (market value) and what you still owe on finance if your car is written off. Without GAP, if your £20,000 car is written off after 2 years and is now worth £12,000, but you still owe £15,000 on finance, you'd be £3,000 out of pocket. GAP insurance covers this shortfall. Always compare GAP prices independently - dealer prices are typically 2-3x the cost of independent GAP providers.

Part Exchange Value

When ending a PCP and getting a new car, your part exchange value is the car's market value minus the outstanding GFV. If your GFV is £8,000 and the car is worth £11,000, you have £3,000 equity to put towards your next car's deposit. Use this as negotiating leverage with dealers. Check independent valuations from We Buy Any Car, Arnold Clark and Auto Trader before accepting a dealer part-exchange offer.

How the Car Finance Calculator UK 2026: PCP and HP Works

This calculator helps you understand your financial position using current UK rates and regulations for the 2025/26 tax year. Whether you are planning savings, evaluating loan options, or projecting investment growth, accurate calculations are essential for making informed decisions about your money.

UK financial products are regulated by the Financial Conduct Authority (FCA). Interest rates, fees, and terms vary significantly between providers, so comparing actual costs rather than headline rates is important. This tool gives you a clear picture to inform your comparisons.

Key Information for 2025/26

The Bank of England base rate is 4.5% as of early 2026. The Personal Savings Allowance lets basic rate taxpayers earn up to £1,000 in savings interest tax-free (£500 for higher rate taxpayers). The annual ISA allowance remains at £20,000, and the Lifetime ISA allowance is £4,000 with a 25% government bonus for first-time buyers or retirement savings.

Example Calculation

Saving £200 per month into an account earning 4.5% AER would grow to approximately £2,454 after one year, including £54 in interest. Over 5 years at the same rate, your £12,000 in contributions would grow to roughly £13,362, earning £1,362 in compound interest.

Source: Based on current UK financial rates. Last updated March 2026.

Frequently Asked Questions

What is PCP car finance?
PCP (Personal Contract Purchase) is the most popular car finance in the UK. You pay a deposit, then lower monthly payments covering only the depreciation. At the end you can pay a balloon payment (GFV) to own the car, return it, or use any equity towards a new one. You don't own the car during the agreement.
What is HP car finance?
HP (Hire Purchase) means you pay a deposit then fixed monthly payments covering the full cost of the car plus interest. At the end of the term you own the car outright automatically - no final balloon payment. Monthly payments are higher than PCP but ownership is guaranteed at the end.
PCP or HP: which is better?
PCP offers lower monthly payments and flexibility but you don't own the car without paying the GFV. HP costs more monthly but you own the car automatically at the end. If you change cars every 2-4 years, PCP works well. If you keep cars long-term and want ownership, HP or a personal loan is usually cheaper overall when counting total interest paid.
What is a good APR for car finance in 2026?
In 2026, a good APR for car finance is typically 5-9% for new cars (manufacturer deals), 8-14% for used cars, and 5-8% for personal bank loans over £7,500. APR below 7% is excellent; above 20% should be questioned. Always compare the total cost of credit, not just the monthly payment.
What is the Guaranteed Future Value (GFV) in PCP?
The GFV is the predicted residual value of the car at the end of your PCP term. It's set by the finance company based on the car model, agreed mileage, and term length. Your monthly payments only cover the difference between the purchase price minus deposit and the GFV. You don't pay interest on the GFV during the agreement - only if you choose to pay it at the end.
Can I settle my car finance early?
Yes. Under the Consumer Credit Act, you have the right to settle car finance early at any time. Request a settlement figure in writing - the lender must provide it within 7 days. They can charge up to 58 days' worth of interest as a fee. For PCP, once you've paid 50% of the total payable amount, you can Voluntarily Terminate (VT) the agreement and return the car with no further payments.
What is GAP insurance for car finance?
GAP insurance covers the difference between your car insurer's market value payout and what you still owe on finance if the car is written off or stolen. It's particularly valuable in the first 1-2 years when depreciation is fastest. Always compare GAP prices from independent providers rather than buying from the dealer, where prices are typically 2-3 times higher.
MB
Mustafa Bilgic
UK calculator specialist. All finance calculations are for illustrative purposes. Always get a formal written quotation from a regulated lender before entering a finance agreement.

Official Sources

Data verified against official UK government sources. Last checked April 2026.