Hire Purchase vs. PCP Financing

Hire Purchase vs. PCP Financing

Blog / Hire Purchase vs. PCP Financing


There are four major types of finance plans when buying cars, and we will be comparing and contrasting two of those in today’s article. Hire Purchase and Personal Contract Purchase (PCP) finance plans are very popular with drivers, and each of them has their own core elements that could sway a decision for a would-be customer, which is what we will now discuss in more depth.

Let’s begin by noting what they have in common: both require a deposit payment which is then taken out of the overall cost. This means that around 90% of the total fee will be covered by staggered monthly payments, because 10% (or thereabouts) will have been paid prior to the deal beginning. It means that, besides that one pre-plan amount, the monthly costs will be a little lower, and will ultimately make it easier to pay off over the long-term period (which could be anything from one to seven years).


In terms of the most notable difference, this concerns how you take ownership of the vehicle, if at all. What do we mean? Well under the terms and conditions of a Hire Purchase, the car is never officially yours, hence the word “hire”. You return the vehicle once the deal ends, and you then move onto another car if you wish to be driving as soon as possible. It sounds like a possible deterrent, but it means that you will be paying less to drive the motor since it is not under your ownership, and it also suits anyone who tends to switch cars anyway every couple of years. Some of the pressure is removed when you realise that the vehicle is not yours when all is said and done with the plan.

As for the Personal Contract Purchase: in this case, you do have the option to buy the car once the deal has come to an end. If you wish to purchase the vehicle, a pre-arranged balloon payment will be necessary, and at that point, it comes from a car you are driving but don’t own to a vehicle that is officially yours with no subsequent additional costs aside from insurance, petrol etc. This is more suited to those who may want to buy the vehicle but won’t know until the time comes to make a decision, though it could mean that you are paying more money per month for a model that you might not wish to keep beyond the deal.

Either way, these are the main points that differentiate a Hire Purchase from a Personal Contract Purchase, and this information may serve as a guide for you when buying your next car.


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