Do you know which one you signed?

PCP and HP look almost identical on the forecourt and behave very differently at the end. Two words on the paperwork decide which you have.

Know which agreement you signed, and what it means

  • The exact words to look for on your paperwork
  • What each one leaves you owning at the end
  • Mileage limits, final payments, and which apply to you

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Side by side

HP

Hire purchase

You pay the whole value of the car across the term. At the end, once a small option-to-purchase fee is paid, the car is yours. Payments are usually higher, and there is no mileage limit.

PCP

Personal contract purchase

You pay off the depreciation, not the whole car, so payments are lower. A large optional final payment sits at the end, and there is a mileage limit with charges if you exceed it.

Telling them apart

Where do I look?

The agreement names itself, usually in the first line or the header. Look also for an "optional final payment" or "guaranteed minimum future value": those belong to PCP, not HP.

Is one better?

Neither is better in the abstract. HP costs more each month and leaves you owning a car. PCP costs less each month and leaves you with a decision. Which suits you depends on what you want at the end.

Can I switch?

Not mid-agreement, no. You can settle one and start another, but that is a new agreement with new costs, so it is worth doing the arithmetic first.

Know your agreement in five minutes a week

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Know which agreement you signed, and what it means

  • The exact words to look for on your paperwork
  • What each one leaves you owning at the end
  • Mileage limits, final payments, and which apply to you

Free. Choose email, text, or both. Unsubscribe from any message.

Motor Moola is a free newsletter about running a car. Choose how you would like to hear from us.

Your details are stored securely. You can ask to see the record we hold, or withdraw any of these permissions, at any time.