PCP VS Hire Purchase: What’s The Difference?
PCP VS Hire Purchase: What’s The Difference?
Choosing what finance agreement you want for your next car might not seem like an important decision. They are all fundamentally the same; over a 2 to 5 year period, you pay back the loan you received from the lender to purchase the car in monthly instalments. Hire Purchase, PCP, and Personal Leasing are the three most advertised finance agreements around. Each differs in terms of requirements needed to determine payments and the expectation for the vehicle once your contract ends. At Hilton Car Supermarket, we are going to discuss the differences between the two main finance deals; Hire Purchase and PCP.
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What is Hire Purchase?
Hire Purchase finance is perhaps the simpler of the two agreements as only the car’s value and interest make up the monthly instalments, a deposit is required, and the intention of the vehicle is that it will become yours once the agreement has ended. Payments tend to be high, but this is the most suitable agreement if you intend to own the vehicle, as only a small transfer fee may be required.
What is PCP?
PCP finance, or Personal Contract Purchase, also requires a deposit, but you’ll instead be making payments based on the car’s depreciation plus interest and any agreed on mileage limits. Payments tend to be lower than Hire Purchase agreements as the intention for the vehicle once the contract ends is for it to be returned or part exchanged. While it seems more cost-effective upfront, exceeding the annual mileage limits will result in additional charges. If you decide that you want to own the car, you’ll be required to make a much larger payment that’ll cover the vehicle’s future value.
What Are The Key Differences?
While you can own the vehicle with both finance agreements, it’s a much smoother process with Hire Purchase and more cost-effective overall
Payments tend to be lower with PCP agreements, and as long as you stick within your agreed mileage limits, you shouldn’t have to pay any additional charges
PCP is more suitable if you prefer to change your car regularly
You have more freedom of what you want to do with the at the end of a PCP finance agreement
When it comes to Hire Purchase and PCP, it’s not a case of which is better but more about what you want at the end of the agreement. Going with a PCP agreement and deciding you want to own the car isn’t going to be the best decision for your wallet, as would choosing a Hire Purchase agreement and realising that you don’t want to own the vehicle you’re driving. Knowing exactly what you want before signing the contract gives you the best chance of getting the right used car finance for you.
At Hilton Car Supermarket, we have over 200 used cars in our current stock should you be looking for used cars in London and Amersham, and we can help arrange used car finance for you as well. To get started, all you need to do is use the finance calculator on our website, and you’ll receive an instant no-obligation quote based on the information you submit to us.