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A challenging question: PCP vs HP

A challenging question: PCP vs HP

Posted On 12 Jul, 2017

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Recently, finance has been in the news a lot. The Bank of England announced that it was going to stress test banks because levels of UK consumer lending have been rising significantly.

With all this in mind, it never hurts to examine some of the options for used car finance, especially given potential changes to lender's willingness to finance in future.

Spread the load

The simple fact is that spreading the cost of used cars for sale, or indeed new cars, holds a lot of appeal for motorists.

HertzRent2Buy can't advise you on individual finances and how fit they are for you. But we can suggest that you learn the most you can about finance, and car sales in the UK, to arm yourself with the best information.

PCP

Personal Contract Finance has for some years been the most popular way to finance a new car. The main thing to understand is that there is a significant portion of the loan still to pay at the end of the loan term.

You can either pay off the lot at the end, or hand the car back, or offset its value against another purchase.

HP

Contrastingly, Hire Purchase is a system whereby you pay off the amount owed in a set amount every month for the term of the loan. This would normally be paid off over the course of perhaps 4 years, but it's up to you to check exact terminologies.

It's tough to advise customers on the best option, simply because we don't have access to your finances and we don't know what levels of lending you feel comfortable with, or can afford.

So, at the end of the day, you must decide whether finance is the best way forward for you. Certainly bear in mind that used cars are always better value than new cars, which suffer significantly from depreciation the moment you drive off the forecourt.

But more importantly, take time to consider what you can really afford. Don't be rash. Don't rush into an agreement and be sure to genuinely think how things would work out if you can't repay as planned.

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