Hire purchase vs PCP

[PSJ86]

I am looking at buying a new car and wanted to know the differences and benefits of hire purchase and PcP

I have always purchased my cars outright and am a completely newbie when it comes to these finance arrangements.

I usually keep my cars for a while (6-10 years) but I am currently looking at a slightly more expensive car, I could buy it out right but I wanted to know the benefits of PCP or hire purchase agreements before deciding which way to go.

What are your thoughts, have you had either a pcp or hire purchase arrangement and did you find it more beneficial?

I have a reservation that I would be paying interest on a vehicle and at the end I don’t own the car or I would need to pay the balance and would be deeper in the hole for the car?

[Mandat]

PSJ86 said:

I am looking at buying a new car and wanted to know the differences and benefits of hire purchase and PcP

I have always purchased my cars outright and am a completely newbie when it comes to these finance arrangements.

I usually keep my cars for a while (6-10 years) but I am currently looking at a slightly more expensive car, I could buy it out right but I wanted to know the benefits of PCP or hire purchase agreements before deciding which way to go.

What are your thoughts, have you had either a pcp or hire purchase arrangement and did you find it more beneficial?

I have a reservation that I would be paying interest on a vehicle and at the end I don t own the car or I would need to pay the balance and would be deeper in the hole for the car?

HP & PCP are essentially the same thing, except with PCP there is a different payment profile, as well as the option to return the car to the finance company at the end of the term rather than completing the purchase.

With both products, you will own the car once all of the payments have been made.

PCP monthlies will generally be lower than HP monthlies, but that is because you are not paying off the balloon payment that becomes due at the end of the PCP term. However, the interest element will be greater with PCP since the balloon is not being reduced during the term.

Both products are flexible, and you can pay off the loan at any time, including part-ex'ing or selling the car if you need to.

Putting in a larger deposit / down payment reduces the loan amount, which therefore also reduces the interest payable.

With both products, you are the registered keeper and the car is essentially yours, unlike with a lease, where you are only renting.