PCP Vs HP Car Finance | LMC

Feb 5, 2022 | The Hub | 0 comments

When it comes to buying a car, you’re presented with a number of options; one of those being car finance. However, car finance can be a difficult field to navigate, to know what all the different options are, and most importantly, which one is best for you. In this guide, we’re going to take an in depth look at personal contract purchase vs hire purchase car finance, to give you all the information possible to make an informed decision when it comes to buying your next car.

PCP car finance

Personal contract purchase car finance is a form of secured loan. This means the loan is secured against the car, so you don’t actually own the car, until you make the final instalment.

A large chunk of the overall loan amount is deferred to the end of the agreement, so your monthly repayments are likely to be lower, making this a much more manageable option.

Disadvantages of PCP car finance

-You don’t have full ownership of the car until the end of the agreement

-If you fall behind on repayments for whatever reason, there is a chance the lender could repossess the car

Advantages of PCP car finance

-Great if you’re interested in buying a newer model of car

-You’re more likely to get approved for this type of finance, as the lender takes into account that the asset is secured against the loan.

-You have more flexibility at the end of the agreement when it comes to deciding what you’d like to do with the car. You can either pay the final lump sum amount ‘balloon payment’ to own the car outright, exchange it for another car from the same dealership or return the car altogether.

HP car finance

Hire purchase car finance is often considered a simpler form of finance in comparison to PCP. There are three elements to PCP; the initial deposit, the monthly repayment schedule and the end options, whereas hire purchase is a far simpler agreement. The entire amount borrowed on a hire purchase agreement is paid over equal monthly instalments, and at the end of that, you then own the car. 

Disadvantages of HP car finance

-Not ideal if you prefer to upgrade your car regularly

-If you’re unable to keep up with your monthly repayments, the finance lender can take back the car.

Advantages of HP car finance

-The monthly repayments and interest rates are fixed, making it a more manageable option.

-You can settle the finance agreement early in most cases, but double check with the finance lender

-You own the car outright at the end of the agreement.

How long does it take to be approved for a car finance loan?

This depends on your own personal circumstances, but most approvals are instant to up to 24 hours. At LMC our application takes just two minutes to complete and we aim to give you a decision as soon as possible.


Can I upgrade my car if I have outstanding finance?

Yes, if you’re on one of these car finance deals and want to upgrade your car early, you can do so. The only consideration you have to take into account is that certain car finance agreements will have a minimum amount you have to have paid before you can do so. Therefore, it’s important to check your finance contract before you consider refinancing.

What about car finance at LMC?

At LMC we work with over 30 car finance lenders to bring customers looking for car finance in Essex different options to choose from. Our free finance checker enables you to see if you’re eligible for finance before you apply, or you can obtain professional information from our expert team by contacting us if you’re unsure of which finance deal is right for you.