How to use this calculator
The results update as you type.
- Car price: the cash price of the car.
- Deposit: the cash you’ll put down, plus the value of any part-exchange.
- Agreement length: how many months you’ll make payments.
- APR: the rate on your finance quote.
- Optional final payment (PCP): the amount due at the end if you want to keep the car. Enter 0 for hire purchase.
- Option to purchase fee: a small fee some lenders charge with the final payment.
The results show your monthly payment, the amount borrowed, the final payment, the total amount payable, and how much of that is interest and fees. For PCP, you’ll also see the monthly payment as hire purchase, and the point at which you could hand the car back.
Example: a £25,000 car on PCP
Say you’re buying a £25,000 car with a £3,000 deposit, over 48 months at 9.9% APR, with a £9,000 optional final payment. Both options include a £10 option-to-purchase fee.
| PCP | Hire purchase | |
|---|---|---|
| Amount borrowed | £22,000.00 | £22,000.00 |
| Monthly payment | £403.34 | £556.92 |
| Final payment | £9,000.00 | none |
| Total amount payable | £31,370.30 | £29,742.20 |
| Interest and fees | £6,370.30 | £4,742.20 |
PCP saves you £153.58 a month, but if you keep the car it costs £1,628.10 more overall. That’s because you pay interest on the £9,000 final payment for all 48 months, while hire purchase pays it down from the start.
PCP can still suit you if you plan to hand the car back or change it at the end, as long as you stay within the mileage limit and look after the car.
Under the Consumer Credit Act, you can usually end the agreement and return the car once you’ve paid half the total price. On the PCP example, that’s £15,685.15, including your deposit.
How it’s calculated
- Amount borrowed = car price − deposit.
- Monthly payment = (amount borrowed − final payment ÷ (1 + r)^n) × r ÷ (1 − (1 + r)^−n), where r is the monthly rate (APR ÷ 12 ÷ 100) and n is the number of months. The final payment is paid at the end, so it’s discounted back to today. With no final payment, this is a standard hire purchase payment.
- Total amount payable = deposit + monthly payments + final payment + option fee.
- Interest and fees = total amount payable − car price.
Lenders work from the APR as an annual compound rate, so your quote may differ by a few pence a month. The calculator doesn’t include mileage or damage charges at the end of a PCP agreement.
Tips for getting car finance
- Compare the total amount payable, not just the monthly payment. A lower payment can hide a higher total cost.
- Decide what you’ll do at the end. If you want to keep the car, compare PCP with hire purchase or a personal loan.
- Set a realistic mileage limit. Excess mileage charges can add up quickly on PCP.
- Get quotes from more than one lender. Dealer finance isn’t the only option; banks and other lenders offer car finance and personal loans.
- Know your right to hand the car back. Once you’ve paid half the total price, you can usually end a hire purchase or PCP agreement.
Frequently asked questions
What is the difference between PCP and hire purchase?
With hire purchase, your monthly payments cover the whole amount borrowed and you own the car at the end. With PCP, a large part of the cost is left as an optional final payment, so monthly payments are lower. At the end, you can pay it and keep the car, hand the car back, or part-exchange it.
Is PCP cheaper than hire purchase?
The monthly payments are lower, but you usually pay more in total if you keep the car, because you pay interest on the final payment for the whole agreement. In our example, PCP costs £403.34 a month against £556.92 for hire purchase, but £1,628.10 more overall.
Can I hand the car back early?
For hire purchase and most PCP agreements, the Consumer Credit Act lets you end the agreement and return the car once you've paid half the total price. In our example, that's £15,685.15. Check your agreement, because condition charges can apply.
What is the optional final payment?
It's the amount you pay at the end of a PCP agreement if you want to keep the car, sometimes called the balloon or guaranteed minimum future value. The lender sets it based on what it expects the car to be worth.
What other costs should I check on PCP?
PCP agreements usually have a yearly mileage limit and charges for excess mileage or damage beyond fair wear and tear when you hand the car back. There's often a small option-to-purchase fee too. These aren't included in the monthly payment.
Why is my quote slightly different?
Lenders work out payments from the APR as an annual compound rate, and may add fees. This calculator divides the APR by 12, which can differ by a few pence a month. Your finance agreement shows the exact figures.