Comparing Hire Purchase and Personal Contract Purchase

What are HP and PCP?

Personal Contract Purchase (PCP) and Hire Purchase (HP) are both finance agreements that allow you to pay monthly for your car.

Although they have many similarities there are also a lot of differences between the two finance methods.

If you're trying to decide between the two, you're in the right place. Below is a table that highlights the advantages and disadvantages of both types of finance to help you make an informed decision on which is best for you.

What's the difference between HP and PCP?

HP is a great option if you would like to own the car outright and have the flexibility to drive as many miles as you like without worrying about wear and tear. You may pay more per month than in a PCP agreement but you're paying towards owning the car at the end of your agreement.

PCP will suit you if you don’t want to be tied down to owning the car outright. This finance agreement gives you the freedom to keep your options open at the end of the term. However, you'll have the option to buy the car for a set price, as set out at the start of your agreement.

You'll also have the option to give the car back and, providing you have stayed within fair wear and tear and mileage limits, you can walk away without paying any other fees. Last of all, you can trade the car in for another, using its value towards a new PCP agreement.

PCP and HP pros and cons

HP Pros	HP Cons
You're paying towards owning the car at the end of your agreement	You'll be paying for the total cost of the car over the course of your agreement
You don't need to worry about annual mileage restrictions or wear and tear on the car	You'll only own the car once you have paid the final agreed instalment
You can contribute a higher deposit to lower the monthly repayments	You're likely to pay more back each month than on a PCP plan

PCP Pros	PCP Cons
You have the freedom to return the car at the end of the agreement	You'll need to stick to agreed wear and tear limits or face financial charges
At the end of the agreement, you have the option to purchase the car or take out a new PCP deal	You'll need to stick to an agreed annual mileage or risk being charged extra
You may only have to pay a small deposit to start your PCP plan, unlike on a HP plan	You won't own the car at the end of the deal unless you pay the optional final payment

Finance your next used car your way

If you feel confident that you know what you want from a car finance agreement, then you can go right ahead and arrange your finance online with CarStore. It's simple, easy and quick to do.

However, we know that you may want someone to help you understand everything that's involved with finance. Our personal advisors will be happy to listen to your individual requirements and present you with all the information using plain, jargon-free language.

Talk to us online, over the phone or contact a CarStore Centre with any questions you may have.