CalculatorsSwitch calculator
How this works
The calculator takes the car’s price minus your deposit as the amount you’re financing, turns the APR into a monthly rate and works out the fixed monthly payment.
With hire purchase (HP) the payments clear the whole amount. With PCP, part of the loan is left as a final balloon payment, so the monthly payments are lower, but interest is still charged on the balloon the whole time. At the end you can pay the balloon to keep the car, or hand it back.
What it assumes
- Dealer fees are included in the APR. PCP option-to-purchase fees aren’t included.
- UK APRs are true yearly rates, so the monthly rate is a little below APR ÷ 12.
- You keep to the mileage and condition rules if you hand a PCP car back.
Worked example
An £18,000 car with a £3,000 deposit
- You finance £15,000 at 7.9% APR over 48 months.
- On HP the payment is £363.58 a month. Interest is £2,451.72, so the car costs £20,452 including the deposit.
- On PCP with a £7,000 balloon, the payment drops to £238.40 a month. Interest rises to £3,443.31, and if you pay the balloon to keep the car it costs £21,443.
- Hand the PCP car back instead and you’ve paid £3,000 plus about £11,443 in monthly payments for four years’ use.
Worked out with the same maths as the calculator above.
What to do next
Common questions
Why does PCP cost more interest if the payments are lower?
You’re still borrowing the balloon amount for the whole deal and paying interest on it. The lower monthly payment comes from putting off a large part of the cost, not from it being cheaper.
Can I end a car finance deal early?
Yes. You can settle early by paying off the balance. On regulated HP and PCP deals, the Consumer Credit Act also lets you end the agreement and return the car once you’ve paid half of the total price, called voluntary termination.
Is a bigger deposit worth it?
A bigger deposit means a smaller loan, lower payments and less interest. Keep enough back for an emergency fund, so a repair bill doesn’t end up on a credit card.
Is 0% finance really free?
The interest is, but the car price may be less negotiable, and some deals need a large deposit. Compare the total you pay with a cash price or a cheaper loan elsewhere.