Car Finance Pros and Cons

Make an informed decision when securing car credit with these car finance pros and cons

Jan 14, 2019

Buying a car on finance has become de rigueur for most. But if you’ve not done it before, it can seem baffling.

Each type of finance is usually suited best to a different situation.

The most popular type of finance is PCP (Personal Contract Purchase). 

Your PCP repayments only cover part of the car’s cost - the value that it’s expected to lose during the agreement. This makes monthly instalments cheaper than some other types of finance. Agreements typically last between two and five years, and at the end, you can hand the car back with nothing more to pay. You also have have the option to buy the car outright.

HP (Hire Purchase) is popular for those wanting to own a car.

Hire Purchase agreements are aimed at people to who want to buy a car outright. The cost is spread over a series of fixed monthly instalments, usually for between two and four years. You own the vehicle as soon as the final payment is made.

Leasing is also inceasing in popularity, although it's not strictly car finance. It's also known as PCH (Personal Contract Hire).

PCH is probably the easiest to understand. It's a long-term car rental agreement that offers simplicity and and low monthly payments for a brand new car.

Scroll down to see some more detailed pros and cons of each type of finance.

Car finance pros and cons

Monthly payments

Monthly payments

No-deposit option

Do you own the car?

Mileage charges?

Damage charges

PCP

Lower

Optional

*

*

HP

Higher

-at end

PCH

Lower

  

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