UK Car Finance Comparison Calculator

About UK Car Finance Comparison Calculator

This car finance comparison calculator helps you compare the three main ways to finance a car in the UK: PCP (Personal Contract Purchase), HP (Hire Purchase), and PCH (Personal Contract Hire, also known as leasing). Enter the car price, your deposit, and the terms for each option to see monthly payments, total cost, and total interest side by side.

How PCP, HP, and PCH Work

Each finance type uses a different payment structure and gives you a different relationship with the car.

PCP (Personal Contract Purchase) splits the cost into three parts: a deposit, monthly payments covering depreciation, and an optional balloon payment at the end. The monthly payment formula uses a flat rate method common among UK dealers:

Monthly = (Amount Financed - Balloon) / Term + (Amount Financed x APR / 100 / 12)

Where Amount Financed = Car Price - Deposit. Interest is charged on the full amount financed, including the balloon portion, throughout the term.

Worked example (PCP): A car priced at £25,000 with a £5,000 deposit, 4-year term at 8.9% APR, and an £8,000 balloon. Amount financed = £20,000. Capital per month = (20,000 - 8,000) / 48 = £250. Interest per month = 20,000 x 0.089 / 12 = £148.33. Monthly payment = £398.33. Total cost = £5,000 + (£398.33 x 48) + £8,000 = £32,119.84. Total interest = £7,119.84.

HP (Hire Purchase) uses standard amortisation. You pay off the full value of the car over the term, with no balloon at the end. The formula is:

Monthly = P x r / (1 - (1 + r)^-n)

Where P is the amount financed, r is the monthly interest rate (APR / 12 / 100), and n is the number of months.

Worked example (HP): Same £25,000 car, £5,000 deposit, 4 years at 7.9% APR. Amount financed = £20,000. Monthly rate = 0.079 / 12 = 0.006583. Monthly = 20,000 x 0.006583 / (1 - 1.006583^-48) = £487.16. Total = £5,000 + (£487.16 x 48) = £28,383.68. Interest = £3,383.68.

PCH (Personal Contract Hire) is a lease. You pay an initial rental (typically 3 or 6 months upfront), then fixed monthly rentals for the contract length. You never own the car and return it at the end. The monthly rental is based on depreciation plus a finance charge:

Depreciation per month = (Car Value - Residual Value) / Term Months

Finance charge per month = (Car Value + Residual Value) x (APR / 100 / 24)

Monthly rental = Depreciation + Finance Charge

PCH contracts come with an annual mileage limit (typically 5,000 to 15,000 miles). Going over costs extra, usually 5-15p per mile. You can explore loan amortisation in more detail with the auto loan calculator.

Which Car Finance Option Is Right for You?

The best choice depends on your budget, how long you want the car, and whether ownership matters to you.

Feature	PCP	HP	PCH (Lease)
Monthly payments	Low	Higher	Low-Medium
Total interest	High	Medium	N/A (built into rental)
Own the car	Only if you pay the balloon	Yes, after final payment	Never
Mileage limits	Yes	No	Yes (stricter)
Early exit	Voluntary termination at 50%	Voluntary termination at 50%	Early termination fee
Typical APR range	6-10%	5-9%	4-8%
Best for	Changing cars every 3-4 years	Keeping the car long-term	Always driving a new car

According to the Finance and Leasing Association (FLA), PCP accounts for around 80% of new car finance agreements in the UK. PCH leasing has grown significantly, particularly for company cars and drivers who prefer fixed monthly costs with no ownership responsibility. HP remains popular with buyers who want to own the car outright.

If you are unsure whether your monthly payment fits your budget, the budget calculator can help you see how car finance fits into your overall spending.

Tips for Getting the Best Car Finance Deal

Check your credit score first. Your credit score directly affects the APR you are offered. The advertised representative APR only has to be given to 51% of applicants. If your score is below average you could be offered a significantly higher rate. Services like ClearScore, Experian, and Credit Karma let you check for free.

Compare the total amount payable, not just the monthly cost. PCP and PCH look cheap per month but the total cost over the full term is often higher than HP. This calculator shows total cost for exactly this reason.

Negotiate the car price, not the monthly payment. Dealers sometimes stretch the term or adjust the APR to hit a target monthly figure, which can increase your total cost. Focus on the cash price first, then arrange finance separately if possible.

Put down a larger deposit. A bigger deposit reduces the amount financed and therefore the interest you pay. Even an extra £1,000 can save you hundreds over a 4-year term. For PCH, a larger initial rental reduces your monthly cost.

Understand your early exit rights. Under the Consumer Credit Act 1974, you can voluntarily terminate a PCP or HP agreement once you have paid at least 50% of the total amount payable. PCH leases do not have this right. Ending a PCH early usually means paying the remaining rentals or a large early termination fee.

Watch for balloon traps on PCP. If the car depreciates faster than expected (high mileage, damage, or a model refresh), the car could be worth less than the balloon at the end. You would have no equity to roll into a new deal and would either need to pay the difference or hand back the car with nothing to show for your payments.

To understand exactly how APR affects your cost, the APR calculator breaks down the relationship between interest rates, fees, and total repayment amounts.

PCP vs HP vs PCH: A Quick Decision Guide

Choose PCP if you like driving a newer car every few years, want the lowest monthly cost, and are happy not owning the vehicle. PCP gives you the flexibility to return it, buy it, or trade it in at the end.

Choose HP if you want to own the car at the end without a large lump sum, plan to keep it for 5+ years, and put high mileage on it. HP has no mileage restrictions or condition penalties beyond the final option-to-purchase fee.

Choose PCH if you want a new car every 2-4 years with completely predictable monthly costs, do not care about ownership, and drive a consistent number of miles each year. PCH often includes road tax in the rental and sometimes servicing packages too.

Choose cash if you have the savings and do not want to pay any interest at all. Cash is always the cheapest option, but it ties up a large amount of money. Some people prefer to keep their savings invested and finance the car at a low rate instead.

Check the car affordability calculator to see how much car fits your budget before comparing finance options.

Common Mistakes When Choosing Car Finance

Focusing only on monthly payments. A dealer can make any car look affordable by stretching the term to 5 years or offering PCP with a high balloon. But a longer term means more interest, and a high balloon means you owe a big lump sum at the end. Always look at total cost.

Not shopping around for APR. The representative APR quoted in an advert is the rate offered to at least 51% of successful applicants (per FCA rules). The other 49% could be paying more. Get pre-approved quotes from your bank, a credit union, and at least one online lender before visiting the dealership.

Ignoring the mileage cap. Both PCP and PCH agreements set annual mileage limits, typically 8,000 to 12,000 miles. Going over incurs excess charges of 5-15p per mile. If you drive 15,000 miles a year on a 10,000-mile agreement, you could owe £1,000 to £2,000 in excess charges at handback. If you drive a lot, HP avoids this risk entirely.

Rolling negative equity into a new PCP deal. If your car is worth less than the outstanding finance when you want to change, the dealer may offer to add that shortfall onto your next agreement. This means you start the new deal owing more than the car is worth. It can snowball across multiple deals.

Skipping GAP insurance. If the car is written off or stolen, your motor insurer pays the current market value, which may be less than your outstanding finance balance. GAP insurance covers the difference and costs around £100-300 for the full term.

Not reading the fair wear and tear guide. At the end of a PCP or PCH agreement, the car is inspected against fair wear and tear standards (most follow the BVRLA guidelines). Scuffs, dents, and interior damage beyond normal use will result in charges. Keeping the car maintained and fixing minor damage before handback saves you money.