Pay monthly used cars

Don't have the cash to buy your next car outright? Paying monthly could be the answer, with more and more finance options available

John Evans
Jul 27, 2020
Porsche Macan front

As with choosing a mobile phone, when it comes to choosing a car, more and more of us are thinking in terms of what it will cost us per month on finance rather than what it will cost to buy outright.

The two most common forms of car finance are Hire Purchase and PCP finance - Personal Contract Purchase. With the former the car’s price (minus a deposit, if you make one) plus interest, is divided across a series of monthly payments. At the end of the contract you've paid off the entire balance and the car is yours to keep or sell.

With a PCP finance deal, your deposit - if you make one - and monthly payments only cover a portion of the car's value instead of paying off the full price. At the end of the contract you then have three choices: hand the car back and walk away with nothing left to pay (provided you've kept it in good condition and have stayed under the pre-agreed mileae limit), pay the outstanding balance (known as the optional final payment) to buy it or 'part-exchange' it for another car (using any value in the car over the remaining finance balance to put towards your next deposit).

Broadly speaking, Hire Purchase suits those who want to own the car at the end of the contract with the lowest overall amount of interest charged. However, because monthly payments cover the whole cost of the car, they are higher than with PCP finance where you still have to make the substantial optional final payment once you've made the monthly payments if you want to own the car.

To give you a feel for whether you'd prefer the low monthly payments with PCP - plus a large optional final payment to take ownership - or higher monthly payments with no large final payment we've compared what you can get on several popular budgets with both types of finance.

The figures below show what you can get on a 48-month contract. Just remember that while you'd own the car at the end of the Hire Purchase contract, you'd still have to pay thousands of pounds to buy the car if you opted for PCP finance and wanted to keep it. The figures quoted assume the driver has an excellent credit rating.

Pay monthly used cars

1. Vauxhall Adam

Monthly budget £100

Our pick Vauxhall Adam 1.2i Jam 2015 (15), 18,000 miles

Cash price £6,280
Finance term 48 months
Deposit £621

PCP £83/month HP £143/month

Even at this budget, it’s clear that monthly payments are substantially lower with PCP finance than Hire Purchase (HP). In fact, what you’d pay per month on HP would get you into the Mini Cooper S D Seven in the next budget bracket, below, if you opted for PCP. Don't forget, however, that at the end of the HP contract you could sell the car as it's yours, while you would have to hand it back to the finance company with PCP.

Meanwhile, you’ll be surprised how many cars there are at this entry-level budget. All the mainstream car makers are represented, offering a choice of city cars and superminis. Such models are among the most versatile you can buy and terrific value for money.

Fancy something chic? Check out the Fiat 500 or Renault Clio. City runabouts include the smart Peugeot 108 and its sister model the Citroen C1, while larger cars include the evergreen Vauxhall Corsa.

VAUXHALL ADAM BUYERS' GUIDE

2. Mini Hatchback

Monthly budget £150

Our pick Mini Cooper S D Seven 3dr 2017 (67), 26,000 miles

Cash price £13,347
Finance term 48 months
Deposit £1,327

PCP £140/month HP £289/month

The difference between PCP and HP monthly payments is even clearer in this example, with as much as £149 per month separating them. That's because the Mini is worth a lot at the end of the PCP contract, reducing monthly payments. If you want to own it, though, you'd have to make the hefty optional final payment with PCP - that could be as much as £6,000 or more with this Mini so bear that in mind if you want to have something to show for your monthly payments.

Meanwhile, although the budget has increased by only £50, opting for PCP finance brings into budget some genuinely attractive cars including not only our featured Mini but the Mercedes A-Class and the small but sporty Abarth 595 1.4 T-Jet.

High-riding crossovers, that mimic the look of big 4x4s, are all the rage at the moment and there’s one of these at this budget point, too: the practical Peugeot 2008.

MINI HATCHBACK BUYERS' GUIDE

3. Kia Sportage

Monthly budget £200

Our pick Kia Sportage 1.6T-GDI GT-Line 2017 (66), 23,000 miles

Cash price £15,790
Finance term 48 months
Deposit £1,572

PCP £195/month HP £343/month

Once again, PCP monthly payments are lower than HP with this example, as PCP defers some of the car's cost until the end of the contract. At this budget you can take your pick from upmarket models from brands including BMW, Mercedes and Audi. That said, we’ve chosen to highlight the Kia Sportage, a popular family-size SUV with stacks of equipment and a long warranty.

Still, if an upmarket car is more your bag then you’re spoiled for choice. How about a BMW 335d M Sport Gran Turismo, a Mercedes GLC 220d 4Matic Sport Premium Plus or an Audi A3 1.4 TFSI S tronic Sportback for £200 per month or less with PCP?

As these are all desirable models - which are consequently worth a lot at the end of the contract - you'd have to pay a substantial amount, potentially as much as half the initial price to buy any of these at the end of a £200-per-month PCP finance contract.

KIA SPORTAGE BUYERS' GUIDE

4. BMW 4 Series Gran Coupe

Monthly budget £250

Our pick BMW 420d (190) M Sport Gran Coupe auto 2018 (18), 15,000 miles

Cash price £20,158
Finance term 48 months
Deposit £2,008

PCP £249/month HP £438/month

Just look at the difference between those PCP and HP monthly payments. A monthly budget of £250 is achievable for a lot of people but fewer have £438 to spend on a car. However, if you want to own the car at the end of the contract, or keep it for a long time, Hire Purchase makes a lot more sense, as you'll pay less interest and won't have to face a huge optional final payment as with PCP finance - for this BMW that could be anything up to around £10,000 or more, depending upon the contract terms.

With Hire Purchase you're free to sell the car at the end of the contract to free up some cash, part-exchange it for a new one or you can keep it for years to come - the choice is up to you. 

£250 per month unlocks a wide and varied choice of great cars; everything from a Seat Ateca to a Mercedes CLA 180 AMG Line or the BMW 420d Gran Coupe in our example. There are some fun fast Minis, too, or if you'd something rather more economical and not so fast, there’s the Toyota Prius hybrid.

BMW 4 SERIES GRAN COUPE BUYERS' GUIDE

5. Mercedes A-Class

Monthly budget £300

Our pick Mercedes A45 4MATIC 2016 (66), 12,000 miles

Cash price £27,050
Finance term 48 months
Deposit £2,698

PCP £290/month HP £500/month

At this budget, a PCP proves you don’t have to spend more than £300 to buy a truly impressive machine - the rapid Mercedes A45 AMG. The difference between PCP monthly payments and the Hire Purchase equivalent's £500 could cover your running costs, too, though you won't own the car at the end of the contract as you would with Hire Purchase. Remember that you'd have to pay the hefty optional final payment (often around half of the initial cash price), to own the car after the PCP contract period.

There are hundreds of cars to choose from on PCP for £300 per month, representing most brands from Audi to Volvo. We’ve highlighted the super-quick Mercedes-AMG A45 but if your taste is more SUV, there’s the Mercedes GLC 220d. Staying with SUVs there are plenty of Ford Kugas, one of the best-to-drive SUVs you can get.

Meanwhile, lovers of upmarket saloons can choose from the Jaguar XF, Audi A6 and the popular BMW 5 Series. There are even electric cars, too, in the shape of the VW e-Golf. Yes, you might have to look at cars with lower cash prices to get a car on Hire Purchase for less than £300 per month, but you will own it at the end of the contract, unlike with PCP. At that stage you could always sell it to free up cash, trade it in, or keep it with nothing left to pay.

MERCEDES A-CLASS BUYERS' GUIDE

6. Range Rover Evoque

Monthly budget £400

Our pick Range Rover Evoque 2.0 TD4 (180) Autobiography auto 2016 (66), 16,000 miles

Cash price £31,800
Finance term 48 months
Deposit £3,173

PCP £396/month HP £679/month

As you'd expect, the PCP deal here again offers lower monthly payments than the HP deal. But again, there's that large optional final payment to bear in mind with PCP if you want to own the car. If the Evoque doesn't take your fancy, meanwhile, your options are far from limited at this budget with premium car brands including Porsche represented.

We’ve highlighted the desirable Range Rover Evoque but you could have a much more sporty Porsche Macan or for a little less money a Jaguar E-Pace or BMW X4.

Moving away from SUVs there’s the super speedy Audi RS3 Sportback and sleek Mercedes-AMG CLA45. It’s all up for grabs. As always, desirable cars mean large optional final payments with PCP, though. So if you want to own the car, remember that while the HP monthly payments above would see you own the car once you've made the last one, you'd have to make the large optional final payment with the PCP equivalent.

Depending on the car, a £400-per-month deal could require you to pay up to around £15,000 or more. Yes, you can then refinance this if you don't have that kind of cash to hand, but do that and you'll end up paying additional interest, making it a more expensive way to buy the car than going for the Hire Purchase option in the first place.

RANGE ROVER EVOQUE BUYERS' GUIDE

7. Audi Q7

Monthly budget £500

Our pick Audi SQ7 4.0 TDI (435) quattro 2016 (66), 57,000 miles

Cash price £41,230
Finance term 48 months
Deposit £4,116

PCP £481/month HP £881/month

The field really opens up at this budget point with PCP giving you a pass to most makes and models, including an Audi SQ7 at £481 per month. This makes the HP’s £881 monthly payments look very expensive, but don't be so quick; after making £881 monthly payments with Hire Purchase you'd own the Audi, whereas you wouldn't after making the PCP monthly payments.

In fact, you'd probably have to pay an additional £20,000 or so at the end of the PCP contract to buy the car. If you didn't have that kind of money in the bank but wanted to own the car, you'd have to refinance - adding more interest to your costs. Again, Hire Purchase is cheaper overall if you want to own the car with less interest charged, as you pay the debt off more quickly.

We’ve led with the mighty Audi SQ7 but how about something sportier such as the exotic and surprisingly sleek Alfa Romeo Stelvio SUV? Staying with Alfa, you could even have a sporty 4C.

There are Porsche Macans, Cayennes and Caymans, Land Rover Discoverys and Range Rover Evoques, Sports and Velars to choose from, and pretty much every BMW you care to mention. Honda’s here, too, with its CR-V and Lexus with its hybrid SUVs and saloons.

AUDI Q7 BUYERS' GUIDE

8. Porsche Macan

Monthly budget £600

Our pick Porsche Macan GTS 3.0 PDK 2016 (66), 29,000 miles

Cash price £45,189
Finance term 48 months
Deposit £4,512

PCP £592/month HP £966/month

So, £600 per month on PCP finance or nearer £1,000 per month on HP? That might seem like a no-brainer, but don't forget that you're buying the car with Hire Purchase, whereas you're only essentially renting it with PCP. If you want to take ownership at the end of the contract there's that substantial optional final payment to make.

As this can be as much as 50% of the original cash price - even more in some cases - you'd have to pay around £22,000 - in addition to the £592-per-month payments - to actually buy this Macan with PCP finance. Otherwise, you have to hand the car back at the end of the contract.

We’ve gone with a Porsche Macan, a brilliant-to-drive SUV, but we could just as well have gone with a BMW X3, X4, X5 or X6. There are Audi Q5s, Q7s and even the enormous Q8 to choose from, too.

Talking sports cars, a BMW 8 Series Convertible is tempting but so also is the Jaguar F-Type and Ford Mustang, while if luxury holds more appeal, the Mercedes S-Class and Audi A8 are also available.

PORSCHE MACAN BUYERS' GUIDE

 

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