Car finance calculator

Fancy low monthly payments with the option to buy the car at the end? PCP could be for you. Here's our guide to understanding what your budget could get you.

By John Evans August 23, 2024

Before choosing your next car, you need to know how much you can afford to pay for it. That means that if you're planning to finance it, you need to know your budget — but understanding all the factors affecting it can seem complicated. Allow us to help you out.

As well as determining whether the price of the car feels right, you need to factor in the size of the deposit and what monthly payments you can comfortably afford.

Because with PCP finance you are essentially financing the amount it will depreciate over the duration of your agreement, a car with a higher price could still work out costing less per month than a lower priced alternative. If you know your finance budget you can track down the best deals and focus on those and forget the ones that are bad value to finance.

Thankfully there is an easy way to work out which is which. Our PCP finance calculator - available for all cars for sale on BuyaCar.

Caclulating what you can afford

Before anything else, you need to set your budget. With PCP finance, this involves considering how much you can afford to put down as a deposit and the maximium monthly payment you can go up to.

You also need to consider how long you want to run the car for — in general, the longer the contract, the lower your monthly payments, but the more interest you'll pay overall.

Once you've got a feel for how much you can afford, then you can search for cars that fall within budget.

Find the right car for you

Once you know how much you can afford based on your monthly budget, you can search for a car by monthly payment. Narrow down the budget and you can quickly home in on the best options for your needs.

Once you've found a car that grabs your attention, you can simply click on it, scroll to the bottom of the page where you'll see the Want to pay monthly? panel which provides PCP and Hire Purchase quotes on specific cars.

Customer deposit

This is the amount of money you have to pay up front. The more you put down, the less you need to borrow and the lower your monthly payments. This can be funded by cash, or if you own your current car — or are financing it and the car has equity in it, meaning it's worth more than the remaining finance balance — you can put this balance towards the deposit. 

A larger deposit means lower monthly payments and less interest to pay, as you're not borrowing as much, so it's worth entering different deposit amounts to see which gives you the best balance between an affordable deposit and reasonable monthly payments.

Term

This refers to the number of months over which you wish to finance your car. The longer the contract, the lower your monthly payments. However, be aware that by opting for a longer contract you'll also end up paying more interest.

A typical car finance contract lasts three years or 36 months. If you like to change your car more regularly, you may want to opt for a 24-month contract. If you want the lowest monthly payments, though, going for a 48-month or a 60-month contract will reduce what you have to pay every month.

Annual mileage

You might be wondering what your annual mileage has to do with your monthly payments. In fact, if you go for Hire Purchase it shouldn't make a difference, as you own the car once you've made the final payment — so you can do as many or as few miles as you want.

However, in the case of PCP finance, the amount of miles you cover has a direct impact on how much you pay. PCP monthly payments effectively cover how much value the car loses over the contract. As the more miles a car has covered the less it's worth, the higher the mileage agreement you choose, the higher your monthly payments.

You may be tempted, therefore, to opt for the lowest possible mileage allowance for lower monthly payments, but be aware that if you exceed the limit you sign up to, you can expect to be charged an excess mileage fee for every additional mile. Therefore, it's best to estimate your mileage as carefully as possible to avoid end-of-contract charges.

Bear in mind, however, that if you choose to make the optional final payment to buy the car, it's then yours and you can't be issued with any charges as you then own the car.

Deciding between PCP and HP

Different types of finance work best for different people. If you want the best car for your monthly budget, with the option to hand it back at the end of the contract or buy it outright, go for Personal Contract Purchase finance, usually abbreviated to PCP.

If, however, you'd like to own the car with reasonably affordable monthly payments and the lowest overall cost, go for Hire Purchase — or HP, for short.

These finance options are useful for people who don’t want to pay using savings or with an unsecured loan, and you get additional consumer protection by paying with finance.

In the Want to pay monthly? box at the bottom of each used car listing you will see that you can easily compare monthly payments for the same car by switching between PCP and HP.

Monthly payments for Hire Purchase work out higher than with PCP, as they cover the entire value of the car. Once you've made the last payment, the car is yours to keep.

With PCP, however, you get low monthly payments and you can either hand the car back at the end of the contract or make the large optional final payment to buy it. Keep reading for other factors that will affect the size of your monthly payments.

Our expert BuyaCar finance guides cover these car finance options in greater detail.

Credit rating

PCP finance and HP costs are affected by your credit rating, which represents the level of risk you pose to the lender. This is a key factor in determining what level of interest you're charged, which in turn affects your monthly payments. If you're considered a safe bet, lenders will charge you less interest.

If you have a lower credit score, however, lenders will charge more interest to cover the greater risk of not getting all of their money back.

If your credit rating is on the low side and you don't need a new car straightaway, fear not. You could be better off taking steps to get your finances in order — which could take a few months to take effect — and by checking your credit file for errors and flagging any mistakes to the credit reference agency.

Check out our guide to learning what your credit score means and how to maximise your chances of being approved for finance, even if you've been turned down before.