PCP Calculator UK — Personal Contract Purchase Car Finance

How PCP Car Finance Works

Personal Contract Purchase (PCP) is the most popular way to finance a new or nearly-new car in the UK. Roughly four out of five new cars bought on finance are bought on PCP, because it keeps monthly payments lower than other methods and gives you flexibility at the end. Instead of paying off the entire value of the car over the term, you only pay off the part of the value the car is expected to lose (its depreciation), plus interest — the rest is deferred to a single large optional payment at the very end.

A PCP agreement has four moving parts:

• Deposit. An upfront payment, often 10% of the car’s price, which can be cash, a part-exchange, or a manufacturer deposit contribution. A larger deposit lowers your monthly payments.
• Monthly payments. These cover the depreciation (the amount financed minus the balloon) spread over the term, plus interest on the whole outstanding balance.
• Balloon payment (GFV). The Guaranteed Future Value is a large, optional final payment set at the start. It is the lender’s guaranteed estimate of the car’s value at the end of the contract, calculated from the term and your agreed annual mileage.
• The agreement length and mileage. Typically 24–48 months and a fixed annual mileage allowance (e.g. 8,000–12,000 miles). Higher mileage means more wear, so the lender sets a lower GFV — which pushes your monthly payments up.

The three end-of-contract options. When the agreement ends, you choose one of three routes:

1. Pay the balloon and keep the car. Pay the GFV (often by refinancing it) and the car becomes yours.
2. Hand the car back. Return it to the finance company and walk away owing nothing further, provided you are within the mileage limit and the car is in fair condition. Because the GFV is guaranteed, you are protected if the car is worth less than expected.
3. Part-exchange. If the car is worth more than the GFV, that difference (“equity”) can be put towards the deposit on your next car.

How the PCP Monthly Payment Is Calculated

This is where PCP differs from a normal loan. The amount you actually borrow is the car price minus your deposit. But the balloon payment (GFV) is parked at the end, so it is not repaid bit-by-bit during the term — you only pay interest on it. Your monthly payment is therefore the sum of two separate amounts:

Add the two together and you get your monthly payment. This is exactly the calculation our PCP calculator above performs. If you set the balloon/GFV to zero, the second part disappears and the maths collapses to a standard Hire Purchase loan — which is why HP monthly payments are higher.

Worked Example: A £25,000 Car on PCP

Let’s run a realistic example through the calculator so you can see exactly how the numbers come out. Suppose you are buying a car priced at £25,000, putting down a £3,000 deposit, over a 36-month term, at a representative 9.9% APR, with a balloon payment / GFV of £10,000.

So in this example you would pay around £469 a month for three years, after which you can either pay the £10,000 balloon to keep the car, hand it back, or part-exchange it. The finance costs you £4,889 in interest if you go on to own the car. Note that the figures from this calculator are estimates for guidance — your actual quote may differ slightly because lenders include fees (such as an option-to-purchase fee) and may apply a slightly different rate calculation.

PCP vs HP vs Personal Loan: Which Is Best?

There are three main ways to finance a car in the UK, and the right one depends on whether you want low monthly payments, to own the car outright, or maximum flexibility.

PCP suits drivers who want the lowest monthly payments and the option to swap into a new car every two to four years. Hire Purchase suits those who want to own the car at the end with simple, fixed payments and no mileage limits — it usually costs less in total interest if you keep the car. A personal loan gives you the most freedom: you own the car immediately, there are no mileage or condition restrictions, and you can sell whenever you like — but the loan is unsecured, so the rate may be higher unless you have strong credit, and monthly payments are higher because there is no deferred balloon. You can compare each route with our car finance calculator, car loan calculator and personal loan calculator.

What APR Means on a PCP Deal

The APR (Annual Percentage Rate) is the single most important number for comparing PCP deals. It is the standardised yearly cost of borrowing — the interest rate plus most compulsory fees rolled into one percentage — so you can compare offers from different lenders on a like-for-like basis. By law, advertised car finance must quote a representative APR, which at least 51% of accepted applicants actually receive. The rest may be offered a higher rate depending on their credit profile.

A few points worth understanding:

• 0% APR deals do exist on PCP, usually manufacturer-subsidised on specific models. With a genuine 0% deal there is no cost of credit — you pay only the cash price spread out — but they often require a larger deposit.
• Your personal APR depends on your credit score, the deposit you put down, and the lender. As a rough 2026 guide, excellent-credit and subsidised deals sit around 4%–7%, mainstream deals around 8%–12%, and weaker-credit deals can be 13%–20% or more.
• Watch the total cost, not just the monthly payment. A lower monthly payment with a high APR and big balloon can cost far more over the deal than a slightly higher monthly payment at a lower APR. Always check the total amount payable and total cost of credit — both of which our calculator shows.

A lower APR directly reduces both your monthly payment and your overall cost of credit, so it is always worth shopping around and improving your credit score before applying.