Personal Contract Purchase (PCP) Car Finance

What’s your monthly budget?

Rates from 9.9% APR. Representative APR 13.9%. We are a credit broker, not a lender.

Representative example: Borrowing £7,500 over 60 months with a representative APR of 13.9%, flat rate of 7.25% and deposit of £0.00, the amount payable is £170.98 per month, with a total cost of £2758.68 and a total amount payable of £10,258.80.

The UK's favourite type of car finance

Looking for the most flexibility possible with your car finance? A personal contract purchase (PCP) deal keeps your options open and your monthly costs manageable. Take a look at our full PCP car finance range below.

What is Personal Contract Purchase (PCP)?

Personal contract purchase (PCP) is the most popular type of car finance in the UK. It’s a flexible finance deal that lets you choose what you want to do with the car at the end of the contract. That means you have the option to keep the car, give it back or, in some cases, use it as a part exchange on a new car.

In a typical PCP deal, you’ll make an initial payment followed by a series of fixed monthly payments for the duration of the contract. At the end of the deal, you’ll have the option to take ownership of the car by making what’s known as a balloon payment. You’ll only need to make this payment if you want to own the car. Otherwise, you’re free to give the car back or use what equity you have in the vehicle as trade-in value.

How does PCP work?

This is the amount you want to put down at the beginning of the deal. It’s usually around 10% of the total cost of the agreement but can be adjusted to suit your budget. We offer no-deposit deals on all our vehicles, meaning you don’t have to pay anything upfront if you don’t want to. Just remember: how much you pay upfront affects your monthly payments. The more you put down for your initial payment, the lower your monthly payments will be, and vice versa.

Your monthly payments are fixed for the duration of the deal. On a PCP deal, your lender will set a ‘Guaranteed Future Value (GFV)’ for your vehicle, which estimates what the vehicle will be worth at the end of the contract. This, along with the interest rate and your initial deposit, determines your monthly payments.

This is an optional one-off payment that you’ll need to pay if you want to take ownership of the vehicle. ‘Optional’ is the key word here. PCP deals allow you to do what you want at the end of your contract. If ownership isn’t the way you want to go, you don’t need to worry about the balloon payment.

What happens at the end of a PCP deal?

One of the biggest advantages of PCP versus any other type of car finance is the end-of-term flexibility. When you come to the end of the contract, you have multiple options available to you:

If you want to keep the car and take ownership of it, you’ll need to pay the final balloon payment. Once the deal is paid in full, the car is yours. If you want to own the car but can’t pay the balloon payment in full, you can look at refinancing the balloon payment, spreading the cost over a longer period.

Part exchange is an option if your car’s market value is higher than its Guaranteed Future Value at the end of your deal. If it is, you’ll be in what’s known as positive equity – effectively a bonus that you can use as trade-in value on a new deal.

If you’d simply rather return the car and walk away entirely, you can, with no further obligation or costs (as long as you hand the car back in good condition and have stayed within your agreed mileage limit).

The pros of PCP

A PCP car finance package is ideal if you’re looking for flexibility, but just like leasing or buying via hire purchase, it works for some better than others. If you’re not sure what option might work best for you, why not speak to a member of our team?

The most flexible financing option

PCP is unlike personal contract hire (PCH) and hire purchase (HP) in that it gives you the choice of what you want to do at the end of the deal. That’s particularly useful if you’re going into it unsure of whether you’ll want to keep the car or want to keep your options open going forward.

Spread the cost of driving across low monthly payments

PCP deals are structured so that up to 50% of the total cost of the agreement is left for the optional balloon payment. That means your monthly costs will typically be cheaper than an alternative like hire purchase.

Change your car regularly

The end-of-term flexibility of PCP agreements means you can switch to a new car on a new deal every few years.

Get access to newer, higher-spec vehicles

Spreading the cost of your agreement via PCP means you might be able to afford a newer or better car on your budget.

Build potential positive equity

If your vehicle’s market value is greater than its Guaranteed Future Value when you reach the end of your agreement, you’ll be able to use the positive equity as part exchange value on a new deal.

The cons of PCP

If you want to buy the car, the balloon payment is typically a substantial amount (up to 50%) of the total cost of the deal. You don’t necessarily have to pay this in full, however – you can look into refinancing it to spread the cost.

Although not as strict as on a leasing deal, you will need to stick to an agreed mileage limit and keep the car in good condition to avoid any end-of-term charges.

If you know what you want to do with the car at the end of your finance deal, other options may be better. For example, if you know you want to give the car back, leasing is cheaper. If you know you want to keep the car, hire purchase spreads out the total cost without a large balloon payment required at the end.

if the car is worth less than its Guaranteed Future Value at the end of the deal, you’ll have to cover the difference if you want to part exchange. You would still be able to buy the car, or give it back and walk away.

Why choose a PCP deal with Hippo Finance?

We’re in a good spot to help you if you want a manageable car finance deal without paying anything upfront - or you’re worried about poor credit affecting your chances of approval.

Checking your eligibility for finance is easy with our free credit check that has no impact on your credit score.*

You don’t need to worry about the quality of the vehicle you’re getting thanks to our Used Car Promise, which includes a 130-point inspection, 3-month warranty and minimum 6-month MOT.

Our end-to-end service covers every element of your car finance package. A dedicated account manager will help you find the right car on the right deal. That’s why we’re rated ‘Excellent’ on Trustpilot.

Find out if you’re eligible for a PCP deal with us today

Getting a PCP deal with us could be closer than you think. The first thing to do is use our free soft credit check to see if you’re likely to be approved for finance with one or more of our lenders. It takes two minutes to apply, won’t affect your credit score* and you’ll typically get a decision in as little as 30 minutes.**

Would you rather talk things through first? Just give us a call and a member of the team will be happy to help you with anything you need.

Learn a bit more or FAQs

What’s the difference between PCP and leasing?

Leasing – or personal contract hire (PCH) - differs from PCP because it’s an outright lease (rental) agreement. There’s no option to buy the car at the end of the deal – you simply hand the car back and walk away. PCP, on the other hand, offers you an array of options at the end of your contract, including buying the car. You also don’t build any equity in a lease deal like you do with PCP, either. You pay to rent the car and nothing more. The other differences between leasing and PCP are:

Leasing usually carries lower monthly payments and a lower total cost because it’s a rental-only agreement.
There’s no optional balloon payment at the end of a lease deal.
Mileage and condition limits are usually more strict on a lease than PCP.
You won’t build any equity in a lease agreement.

What’s the difference between PCP and hire purchase?

The main difference between PCP and HP is the focus on ownership. With PCP, you have the most flexibility of any car finance agreement, with the option to buy, part exchange or return the vehicle. With a HP agreement, you’re working towards purchasing the car from the beginning of the agreement. This difference in buying arrangement means the deals are structured differently, too.

The other differences between HP and PCP are:

PCP monthly payments are usually lower than on an equivalent hire purchase deal. This is because PCP leaves up to 50% of the total cost of the agreement for the optional balloon payment, while HP spreads the entire cost across the deal equally.
There’s no optional balloon payment at the end of a hire purchase deal.
Mileage and condition limits are usually much less strict on a hire purchase deal.

What happens to my deposit at the end of a PCP deal?

Your ‘deposit’ amount (the amount you pay upfront, otherwise known as your initial payment), simply makes up part of the total cost of your agreement. Therefore, it’s not returned to you.

What are the typical terms and conditions of a PCP agreement?

Every PCP agreement comes with an annual mileage limit and the expectation that you’ll keep the vehicle in good condition.

When setting up your PCP deal, you’ll be asked to choose a mileage limit for the year. This helps the lender to anticipate wear and tear on the vehicle and establish a reasonable Guaranteed Future Value (GFV) – which, in turn, influences your monthly payments.

Even though it’s set annually, the milage limit applies over the full contract. So, if you’ve agreed to a four-year contract at 10,000 miles a year, you can use the car as you wish, as long as you return it with less than 40,000 miles driven. Otherwise, you’ll have excess mileage charges to pay.

Likewise, you’ll need to return the vehicle in good condition. As for what ‘good condition’ is, your contract will set out what’s considered normal wear and tear and what’s not. If you return the vehicle in a condition considered worse than expected, you’ll have to pay for the repairs.

Can you pay off PCP early?

You can, but it depends on how much you’ve paid into your deal so far. You’ll need to request an early settlement figure from your lender which will tell you how much you have left to pay.

If the settlement figure is lower than the current value of your vehicle, you should be able to exit the deal without paying anything extra – and use that positive equity as part exchange value on a new deal, if you want one. If the figure exceeds your car’s current value, you’ll need to pay the difference to end your contract.

What credit score do you need for PCP finance?

There’s no set credit score that qualifies or disqualifies you from getting car finance. Each lender has its own criteria. And as bad credit specialists, we work with a diverse panel of lenders, including those willing to work with customers with less-than-perfect credit histories.

The easiest way to find out if you’re likely to be approved for finance with us is to use our free soft credit check. You can typically apply and get a decision in under an hour, and applying won’t impact your credit score.

Does PCP include insurance?

No, PCP deals don’t include insurance. PCP deals require you to find and pay for comprehensive coverage.