PCP finance: the best way to buy used?

Whether you’re purchasing a new or used vehicle, car finance enables you to spread the cost over a series of monthly payments - and potentially could mean the difference between getting the car you really want that should last for years to come or settling for something cheaper that just about does the job for now.

There are several types of car finance, which work for different drivers depending on whether you're looking for the lowest monthly payments, the greatest flexibility or want to own a car for the lowest overall cost. Whichever you go for, you have the ability to adjust the length of the agreement and the deposit to suit your needs.

The most popular type of used car finance is Personal Contract Purchase (PCP). This comes with low monthly payments that only cover part of the car's cost - the difference between the car's price at the start of the contract and its expected value at the end of the term.

If you want to own the vehicle at the end of a PCP contract, therefore, you’ll need to pay the remainder by making the optional final payment to take ownership. Since this amount could easily be half the cash value of the car at the start of the contract, you can either cover this by paying in cash if you're feeling flush or refinancing.

If you don't want to own the car, however, with PCP you’re also able to return the car at the end of the contract with nothing more to pay - provided the car is in good condition and you've stuck to the pre-agreed mileage limit. This makes it easy to budget for regularly upgrading your car.

Keep reading to discover whether PCP is the best way for you to purchase a used car below (click to jump straight there), or click on the button below for the latest PCP deals. And if you need more information about how PCP finance works, check out the video guide below.

PCP finance deals on used cars

Virtually every used car under five years old is available with PCP finance, with monthly payments starting at well below £100 per month - even for cars as young as three years old. Click on any used car on BuyaCar to see a representative finance example.

These examples feature a 10% deposit, but this is adjustable: you can enter a larger deposit to reduce your monthly payments or cut the deposit if you have less cash to hand. A large proportion of models are also available with zero deposit, so there's nothing to pay upfront, though the monthly payments would be higher, as a result, if you take that option.

How PCP finance works

It's easy to compare PCP finance options; if you're sure you want to run the car and then hand it back at the end of the contract, get like-for-like quotes - with the same deposit, contract length and mileage allowance - and the car that has the lowest monthly payments is the one that will cost you the least overall.

Meanwhile, if you're set on owning the car at the end of the contract, every quote should display the total amount payable over the agreement, which includes all interest and fees, as well as the optional final payment needed to take ownership. An APR interest rate, which takes into account both the interest and any compulsory fees that are charged, will also be shown.

Again, get like-for-like quotes and the car with the lowest total amount payable figure should cost you the least overall. Do bear in mind, however, that where large deposit contribution discounts are offered, these are not normally taken into account in the total amount payable figure, so you can subtract the deposit contribution from this number to get the amount that you'll actually pay. 

Used car finance deals

The other main type of used car finance is Hire Purchase (HP), which splits the price of a car - minus any deposit - into equal monthly instalments with a little interest added on top. Once you've made the last payment you automatically own the car. Personal Contract Purchase (PCP) offers lower monthly payments, which again include interest but these only cover part of the car's value, so you don't own it at the end of the contract unless you make the large optional final payment.

At the end of the contract with PCP, you can return the car with nothing left to pay (provided it's in good condition and you've stayed within the pre-agreed mileage limit) or make that optional final payment - sometimes referred to as a 'balloon' payment to buy it.

There’s also the option of taking out a bank loan to purchase a used car or buying one outright with cash. Keep reading for the pros and cons of each.

Although it's a popular option, PCP finance won't be the best choice for everybody. If you're looking to keep your car for several years, for example, and want to have something to show for your monthly payments or specifically want to own the car then HP finance will cost you less overall (assuming the same contract length, deposit and APR charge). If you're able to afford the higher monthly instalments, you'll repay the loan faster with HP, reducing the interest that you pay compared with PCP.

Meanwhile, if you have a large savings pot that you don't need to use for anything else, then you could buy your car outright with cash and avoid interest charges altogether.

We've highlighted some of the pros and cons of different buying options below.

PCP finance

HP finance

Buying in cash

Bank loan