J & J Motors Suzuki: 01437 891600

J & J Motors Suzuki: 01792 812222

J & J Motors Suzuki: 01269 831333

J & J Motors Suzuki: 01656 657840

J & J Motors Nissan: 01269 831444

J & J Motors Ford: 01269 831222

Crosshands Motor Company: 01269 498013

J & J Motors Superstore: 01269 498013

The Differences Between HP and PCP Finance

Owning a car is something most people aspire to have to facilitate their movements with more ease. The first step to ownership is purchasing a motor vehicle that you can manage or one you adore. Purchasing a vehicle upfront may prove difficult to many people, but there are solutions towards ensuring you get your dream car without haemorrhaging your finances at one go.

Car finance

Car finance is the way to go, and you will find multiple offers lined up so that you can buy the car you desire. Car financing is a tenet of asset financing whereby you spread the cost over a set period; once you pay the full costs, the car is yours to keep forever. During the period you’re financing the vehicle, you are responsible for the maintenance and upkeep of the motor vehicle.

This guide will shed some light on two types of car finance, and they are the most common types of car finance. These two types of car finance are:-

  • PCP finance - Personal contract purchase.
  • HP finance - Hire purchase.

PCP finance

PCP finance is a more complicated way of buying a vehicle; it entails using it until the contract ends. The preliminary features of PCP financing are as follows:-

  • You have to pass a credit check.
  • The agreement runs between three to five years.
  • You have to pay a deposit upfront.

PCP deals consist of three main parts: the initial deposit, whereby the dealer or manufacturer can contribute, and the higher the deposit, the lower your monthly installments.

The second part focuses on monthly payments, which pay off the car’s predicted depreciation during the contracted period.

The final part is at the end of the contract you also have several features which are:

  • Pay the resale value and keep it.
  • Return the car.
  • Use the resale value to buy a new car.

Pros of PCP financing

  • PCP financing has low monthly payments.
  • It has more flexible options.
  • Guaranteed future value of the vehicle.

Cons of PCP financing

  • It is very expensive to buy a car outright.
  • You are allowed a limited monthly mileage.
  • There are penalties for damage and excess mileage when you return the vehicle.

HP finance

HP finance is another car finance plan that involves a relatively low initial deposit. The objective of using this financial plan is to own the vehicle at the end of the contract. You should know that the initial deposit is typically 5-10% or more of the vehicle’s value. The rest of the installments are paid monthly at an equal rate over a while.

Pros of hire purchase

  • You pay a relatively low initial deposit.
  • There are flexible payment terms so that you can fit in your monthly budget properly.
  • HP finance has fixed interest rates for the term.
  • You can return the vehicle once you have paid more than half of the installments, and you are not liable to pay for the rest of the term.

Cons of hire purchase

  • You cannot sell or modify the car during the duration of your contract unless you get express permission.
  • Monthly installments are higher than PCP payment terms.
  • It can be an expensive way of owning a car due interest.
  • You don’t own the car until you pay the final payment.
  • The lender can repossess the vehicle if you have not paid a third of the amount payable.

Differences between PCP and HP financing

The main difference is that you can own the car after completing your payment under HP financing, but under PCP, you can opt to return the vehicle or make a balloon payment to own a car.

Hire purchase financing is a more expensive route to owning a car than PCP financing because the monthly installments end up being more expensive than the vehicle's value.

HP and PCP financing paint a picture of short-term and long-term engagements because the contract length of PCP financing is much shorter. HP financing depends on the initial deposit and the vehicle's value then your payment structure is established.

Final thoughts

Owning a vehicle can be a struggle for most people, but you need to know before beginning this journey that you should go for a plan that suits you. You cannot go wrong if you ask for opinions from people who have gone through financial plans; just remember to drive safely and take care of your vehicle once you get into a financial plan.

Latest News

Tips On How To Keep Motoring Costs Low

10-08-2023 The cost of motoring is ever increasing. Fuel prices remain high, insurance…
Read more

A Look At The New Ford Puma

10-08-2023 Launched late in 2019, the Ford Puma has gone from a sporty compact to…
Read more

When Is The Best Time To Buy A New Car?

10-08-2023 When you're thinking of buying a brand new car, you may not be aware that…
Read more

J & J Motors makes every effort to ensure all prices and vehicle details on this website are correct. However, as these are used cars, the standard specification can sometimes differ from that shown. Please satisfy yourself that a vehicle has a specific feature that is important to you before purchasing, our showroom sales staff will be happy to assist you. Prices, offers and details of vehicles are subject to change without notification. * Road Tax Costs: Please note, road tax prices are quoted for used vehicles. A higher road tax charge may apply to brand new vehicles in their first year. Please see the Government web site for more information. J & J Motors Limited is an Appointed Representative of Automotive Compliance Ltd, who is authorised and regulated by the Financial Conduct Authority (FCA No 497010). Automotive Compliance Ltd’s permissions as a Principal Firm allows J & J Motors Limited to act as a credit broker, not as a lender, for the introduction to a limited number of lenders and to act as an agent on behalf of the insurer for insurance distribution activities only. We can introduce you to a selected panel of lenders, which includes manufacturer lenders linked directly to the franchises that we represent. An introduction to a lender does not amount to independent financial advice and we act as their agent for this introduction. Our approach is to introduce you first to the manufacturer lender linked directly to the particular franchise you are purchasing your vehicle from, who are usually able to offer the best available package for you, taking into account both interest rates and other contributions. If they are unable to make you an offer of finance, we then seek to introduce you to whichever of the other lenders on our panel is able to make the next best offer of finance for you. Our aim is to secure the best deal you are eligible for from our panel of lenders. Lenders may pay a fixed commission to us for introducing you to them, calculated by reference to the vehicle model or amount you borrow. Different lenders may pay different commissions for such introductions, and manufacturer lenders linked directly to the franchises that we represent may also provide preferential rates to us for the funding of our vehicle stock and also provide financial support for our training and marketing. But any such amounts they and other lenders pay us will not affect the amounts you pay under your finance agreement, all of which are set by the lender concerned. If you ask us what the amount of commission is, we will tell you in good time before the Finance agreement is executed. All finance applications are subject to status, terms and conditions apply, UK residents only, 18’s or over. Guarantees may be required. It is our intention to provide a high level of service at all times. However if you have reason to make a complaint about our service you should contact J&J MOTORS LTD at Crosshands SA14 6RB / 01269 831222. Regulated Complaints Post: Automotive Compliance Ltd, The Factory, 44 Alfred Street, Gloucester, GL1 4DD Telephone: 01452671560 E-mail: complaints@automotive-compliance.co.uk. If we cannot resolve your complaint within 8 weeks, you may refer your dispute to the Financial Ombudsman Service. This service is free to use. Their consumer helpline is available on 0800 023 4567 or 0300 123 9123 or you can visit their website at http://www.financial-ombudsman.org.uk J & J Motors, Registered Office. Crosshands Business Park, Crosshands, Llanelli SA14 6RB.