PCP vs HP Calculator

What this PCP vs HP calculator does

This calculator compares the two most common ways to finance a car in the UK: Personal Contract Purchase (PCP) and Hire Purchase (HP). Using the same car price, deposit, APR and term for both, it works out your monthly payment, total interest and the total cost to own the car under each agreement – so you can see the real trade‑off rather than just comparing headline monthly figures.

It is built for anyone choosing a car finance deal: new and used car buyers comparing dealer quotes, drivers deciding whether the lower PCP monthly payment is worth the optional final “balloon” payment, and people who want to know what they will actually pay if they keep the car versus hand it back. With HP your monthly payments are higher but you own the car at the end. With PCP the monthly payments are lower because part of the car’s value is deferred into a final balloon payment (the Guaranteed Minimum Future Value, or GMFV), which you only pay if you decide to keep the car. The calculator also estimates excess‑mileage charges, which apply to PCP if you return the car having driven more than the agreed limit.

How it works

Both deals use standard amortisation maths on the amount you borrow (car price minus deposit), at the monthly rate derived from the APR you enter:

• Hire Purchase (HP): the full amount borrowed is spread evenly across every monthly payment. There is no balloon payment, so once the last instalment clears, the car is yours.
• PCP: the balloon payment (GMFV) is deferred to the end of the term, so only the remaining value is amortised into the monthly payments – making them lower. Interest still accrues on the deferred balloon, which is why PCP usually costs more in total interest if you go on to buy the car. You can instead return the car or part‑exchange any equity at the end.

Because car finance APR is set by the lender (it is not a government rate), enter the APR and balloon figure from your actual quote for accurate results. The 9.9% APR and balloon defaults shown are illustrative only.

Worked example

A driver buys a £25,000 car with a £3,000 deposit at 9.9% APR over 48 months, with a £9,000 PCP balloon (GMFV):

• HP: monthly payment £556.92, total interest £4,732.20, total cost to own £29,732.20 – and they own the car automatically.
• PCP: monthly payment £403.34 (about £153.58 a month lower), but to keep the car they pay the £9,000 balloon, giving total interest £9,360.30 and total cost to own £31,360.30.
• If they hand the PCP car back instead, they will have paid £22,360.30 in total and own nothing.

So PCP saves roughly £153 a month here but costs about £1,628 more overall if you keep the car – the classic PCP vs HP trade‑off.

Frequently asked questions

Is PCP or HP cheaper?

HP is usually cheaper in total if you intend to keep the car, because PCP charges interest on the deferred balloon payment as well. PCP has lower monthly payments, so it can feel cheaper month to month and gives you the flexibility to hand the car back instead of buying it.

What is the balloon payment on PCP?

The balloon payment, also called the Guaranteed Minimum Future Value (GMFV), is an optional final lump sum set by the lender that you only pay if you want to own the car at the end of a PCP deal. If you do not pay it, you can return the car or use any equity towards a new one.

Do you own the car with HP?

Yes. With Hire Purchase you own the car automatically once you make the final monthly payment, with no further lump sum to pay. With PCP you only own the car if you choose to pay the optional final balloon payment.

What are excess mileage charges on PCP?

If you return a PCP car at the end of the deal having driven more than the agreed annual mileage, the lender charges a fee for each extra mile, typically a set number of pence per mile defined in your contract. This calculator lets you enter your expected excess miles and the per-mile rate to estimate the charge.

Source: PCP and HP mechanics, balloon payment and GMFV definitions per MoneyHelper (Buying a car with PCP). Car finance APR is set by lenders, not a government rate; figures shown are illustrative – use your own quote.

Related car finance & loan calculators

• PCP Calculator – work out PCP monthly payments and balloon in detail.
• Hire Purchase (HP) Calculator – full HP monthly payment breakdown.
• Car Finance Calculator – general car loan and finance costs.
• Balloon Payment Calculator – estimate the GMFV final payment.
• All UK Calculators – browse every tool on the site.