Hire purchase and personal contract purchase

If you’re making the call between Hire Purchase (HP) and Personal Contract Purchase (PCP) to pay monthly for your car, this guide will help you choose between the two. To learn more about each, check out our dedicated Personal Contract Purchase and Hire Purchase guides – they'll help you get to grips with each option before you decide on which is best for you.

HP vs PCP

So, you’ve heard both sides of the story and hopefully you’re clearer to knowing what used car finance option is best for you. Here’s a handy table to help you find out more about the advantages and disadvantages of PCP and HP:

Hire Purchase

Personal Contract Purchase

Pros

Cons

Pros

Cons

You are paying towards owning the car at the end of your agreement.

You don’t have to worry about annual mileage caps or wear and tear on the car.

You can contribute a higher deposit to lower the monthly repayments.

You’ll be paying for the total cost of the car over the course of your agreement

You will only own the car once you have paid the final agreed instalment.

You are likely to pay more back each month than on a PCP plan.

You have the freedom to return the car at the end of your agreement.

You have the option to purchase the car or take out a new PCP deal.

You may only have to pay a small deposit to start your PCP plan, unlike on a HP plan.

You will need to stick to agreed wear and tear limits or face penalty charges.

You will need to stick to an agreed annual mileage cap or risk being charged.

You won’t own the car at the end of your deal. If you wish to, the cost may be high.

Hire Purchase is a great option if you want to own the car outright and have the flexibility to drive as much as you like without worrying about wear and tear. You may pay more per month than in a Personal Contract Purchase agreement but you are paying towards owning the car at the end of your pay monthly agreement. This level of control means you can drive the car without worrying about any restrictions the lender may put on you.

Personal Contract Purchase is a great option 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 will have the option to buy the car for a set price, as set out at the start of your agreement.

You will 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.