How to use this UK car finance calculator

A useful car finance calculator does more than spit out a monthly payment. On UK forecourts the real choice is hire purchase (HP), personal contract purchase (PCP), and personal contract hire (PCH). This tool puts total cash over the term side by side in pounds, including deposit, part-exchange, and the PCP balloon (guaranteed minimum future value).

  1. Enter the on-the-road price, deposit, and part-exchange. OTR is what you agree to pay. Part-exchange reduces the amount financed on HP and PCP.
  2. Set APR and term. HP and PCP use the same amortising formula; PCP’s monthly is lower because a balloon is held back until the end.
  3. Set the PCP balloon as a percent of price. That is the GMFV on the quote. If you hand the car back and it is within mileage and condition, you typically walk away. If you keep it, you pay the balloon.
  4. Estimate resale if you will own the car. HP TCO subtracts that value because you keep the asset. PCH never gives you an asset.
  5. Fill in PCH initial rental and monthly rental from the contract-hire quote. PCH is a true lease: you return the car.
  6. Compare cash out. A cheaper PCP monthly can still lose on total cost if you were going to keep the car anyway. Mileage over the contract allowance is extra on PCP and PCH — it is not in these figures.

VAT is usually included in a consumer OTR price. Business contract hire and VAT reclaim are out of scope. Road tax (VED) and insurance are running costs on every path.

Why HP vs PCP vs PCH is a cash-over-the-term problem

PCP is designed to look cheap per month. That is how residual value is financed, not a trick in itself. Buyers who only compare payments are answering the dealer’s question instead of their own.

  • You are paying for depreciation either way. PCP itemises it as the balloon. HP hides it until you sell. PCH is rent.
  • Part-exchange is equity you already earned. Putting it into HP or PCP cuts the amount financed. Putting it into PCH as a reduced initial rental does not leave you with a car.
  • Optional final payment is a decision, not a detail. Model both “hand back” and “keep” PCP totals before you sign. Many people who meant to walk away end up refinancing the balloon.
  • Fair wear, mileage, and damage can flip a close PCP or PCH comparison. Read the excess-mileage pence and the condition guide.
  • No credit search to play with balloons. Applying for finance will involve one.

Hire purchase, PCP, and the FCA commission work

British car finance grew out of hire purchase: you hire the vehicle, then own it when the last instalment (and often a small option fee) is paid. PCP, scaled up in the 1990s and 2000s, borrowed the US residual idea and localised it as a guaranteed minimum future value. Personal contract hire is the rental product company-car schemes already knew.

The FCA’s motor-finance commission work in the 2020s is a reminder that the monthly figure on a screen can hide how the deal was priced. APR still lets you compare HP and PCP interest; PCH is a rental so APR is the wrong lens — total rentals over the term is the right one. This calculator keeps those three products in their own columns for that reason. It is not a credit broker and not an illustration under CONC. Use it to decode a worksheet before you sit in the F&I office.