Car Finance Calculator (PCP/HP/Loan)

The three main car finance options in the UK are Personal Contract Purchase (PCP), Hire Purchase (HP) and personal loans. PCP has low monthly payments because you only finance the depreciation, with a large optional final balloon payment to own the car. HP spreads the full cost over fixed monthly payments with no balloon, and you own the car at the end after a small option to purchase fee, usually £1-£99. A personal loan sits outside the dealer entirely and leaves you owning the car from the start.

PCP accounts for roughly 80% of new car finance. You typically put down a 10% deposit, pay monthly for 24-48 months, then pick one of three endings: pay the Guaranteed Future Value to own the car outright, hand it back at no further cost subject to mileage and condition, or roll any equity, meaning the current market value minus the GFV, into a new deal. Most drivers take the third route, which is why PCP rarely builds real equity. The annual mileage you agree at the start is not a formality either. Typical limits run 8,000-12,000 miles, and exceeding them costs 5-15p per mile, while HP has no mileage restrictions.

Choosing between them turns on how long you keep cars. HP monthly payments are higher than PCP for the same vehicle, because you are financing the whole value rather than the depreciation, but the total is usually lower. Personal loans from banks can be cheaper still in total cost when their APR undercuts the dealer's, and the car is yours from day one. On a £25,000 car with a £2,500 deposit over a 4-year term, PCP at 6.9% APR with a £9,500 balloon runs £362.41 a month, or £29,395.71 in total once the deposit and balloon are paid. HP at 6.9% APR runs £535.57 a month for £28,207.37 including the deposit, and a personal loan at 5.9% APR runs £525.80 a month for £27,738.36.

This calculator compares all three side by side in a table under the result, showing the monthly payment, interest and total cost of each, with the deposit included and, for PCP, the balloon you pay to keep the car. PCP and HP use the dealer APR you enter and the personal loan uses its own APR, each converted to a monthly rate as an annual effective rate. Read the output against what you actually want from the car. PCP gives the lowest monthly payment and the freedom to walk away or upgrade every 3 years, at the price of not owning anything. HP costs more each month but hands you the car at the end with no decisions to make. A personal loan usually shows the lowest total cost and carries no mileage limits, though it offers no upgrade path.

Section 99 of the Consumer Credit Act 1974 gives you a route out of both PCP and HP. Once you have paid, or are willing to pay, 50% of the total amount payable, including interest, deposit and the GFV balloon, you can hand the car back and owe nothing further, subject to fair wear and tear. Voluntary Termination is reported to credit agencies in much the same way as a settled account rather than a default, so the effect on your score is minimal. That makes it valuable if a job loss or relocation changes what you can afford.

Between 2007 and 28 January 2021, many dealers earned higher commission by quoting customers higher interest rates, an arrangement known as a Discretionary Commission Arrangement. The FCA banned DCAs from 2021. The Supreme Court ruled on 1 August 2025 in Johnson v FirstRand Bank, narrowing the Court of Appeal decision but finding an unfair relationship where commission was hidden, and the FCA then set up an industry-wide redress scheme. It covers agreements taken out between 6 April 2007 and 1 November 2024 that involved a discretionary commission arrangement, a high commission or a contractual tie between lender and broker: about 12.1 million agreements and £7.5 billion of redress, an average of roughly £829, plus simple interest at Bank Rate plus 1% (minimum 3%). The scheme started on 30 June 2026 for agreements from 1 April 2014 and on 31 August 2026 for older ones. Lenders contact customers who may be owed money, and you can also complain to your lender, whether that is Black Horse, Motonovo, Close Brothers, BMW Financial Services or another, up to 31 August 2027. Parts of the scheme were suspended by the Upper Tribunal on 2 July 2026 while legal challenges are heard, so check the FCA's motor finance page for the current position.

GAP insurance covers the difference between a motor insurance payout, which is based on current market value, and the outstanding finance balance if the car is written off or stolen. New cars depreciate 20-30% in the first year, so the finance balance can easily exceed what the car is worth. In February 2024 insurers covering about 80% of the GAP market agreed to pause sales after the FCA raised fair value concerns, as its data showed only 6% of premiums had been paid out in claims in 2022. Sales resumed from May 2024 with much lower commissions for the firms selling the cover. A 3-year policy typically costs £150-£300, which is worth considering on a new PCP deal and rarely on used HP or an older car.