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New Car Finance

PCP, PCH and HP – How Does Car Finance Work?

Our customers often come to us with questions about new car finance. Here, we’ll take a look at some of the answers to questions like: What is PCP finance? What is Hire Purchase finance? And, how does car finance work? PCP is the abbreviation for a Personal Contract Plan, PCH stands for Personal Contract Hire, whilst Hire Purchase is often shortened to HP. At Brayleys, we’ll help you get the best possible deal and the right finance agreement for you. If you have any questions about car finance, please contact us. We’ll be happy to talk you through the options.

Understanding car finance can go a long way to making sure you make the right decisions and get the best deal when choosing a new or used car. Our finance agreements are designed to make it easier for you to get the car you really want, so our focus is on flexibility, simplicity and affordable monthly payments. We like to pass on any manufacturer deals to you and we often have our own exclusive finance deals available, offering reduced monthly payments and generous deposit contributions. Take a look at all our latest Honda offers, Kia offers, Mazda offers, Renault offers and Dacia offers.

What is PCP Finance? About your Personal Contract Plan

A Personal Contract Plan or PCP agreement is a flexible way of paying for your car. Having chosen the car you want, you can then decide how much deposit you want to pay, how long your finance agreement will run for and the maximum number of miles you will do per year. When your PCP agreement comes to an end, you can make a choice from the three options available.

  1. Buy your car outright after a final optional payment, an amount pre-agreed at the start of your Personal Contract Plan.
  2. If you have taken proper care of the car and not exceeded your annual mileage limit, you can return the car and have nothing more to pay.
  3. You can have a brand new car by renewing your PCP agreement.

Advantages of a Personal Contract Plan from Brayleys include:

  • You can get a new car more frequently, meaning access to the latest models
  • Flexibility of how much you put down as a deposit
  • You choose your repayment term and the amount of your monthly payment
  • Monthly payments on your PCP will usually be less over the same term than for an HP agreement
  • Fixed monthly payments mean you always know exactly how much you’ll have to pay
  • When your PCP comes to an end, you can buy your car and own it outright, return it with nothing more to pay or renew your PCP on a brand new car

What is Hire Purchase Finance? HP explained

Most people know a bit about Hire Purchase, as it’s been around for some time. HP could well be the best finance type for you, if you prefer to have no restrictions on how many miles you do. It also has the advantage that you own the car at the end of the HP agreement.

A Hire Purchase agreement requires you to pay an initial deposit, but you can then decide on how long you want the HP agreement to last, usually a term of between one year and five years. The length of the agreement determines the level of your monthly payments; the longer the agreement, the less you’ll need to pay each month. When the agreement ends, you’ll own the car outright with nothing else to pay. That means you can continue to drive, pass it on to another family member or use it as a trade-in against a newer car

Advantages of a Personal Contract Hire agreement from Brayleys include:

  • Flexibility in the amount of your initial rental fee
  • Flexibility in the length of your rental agreement
  • Your monthly rental payments are fixed in advance
  • Just return the car when your PCH agreement ends
  • No worries about depreciation or selling the car

Ask Brayleys about new car finance

For more information about financing your car at Brayleys, please call us or send us a car finance enquiry

What is Personal Contract Purchase (PCP)?

Personal Contract Purchase (PCP) is a finance product that allows you the opportunity to buy a new or a used car.

It is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments over a term typically between 18 to 48 months.

What makes PCP different to Hire Purchase (HP) is that your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term. Then, when you get to the end of your agreement, there is a final, balloon payment that must be made if you want to keep the car. The balloon payment is often referred to also as the Guaranteed Future Value (GFV).

How does PCP actually work?

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When you have chosen your vehicle, you will then agree your annual mileage and decide on the agreement term with one of our Business Managers.

We will then determine the Guaranteed Minimum Future Value (GMFV) of the vehicle at the end of the agreement and work out a deposit and monthly amount that works for you.

At the end of your agreement you will then have three options:

Return – Simply return the car the back to us
Retain – Keep the car by paying the optional final payment
Renew – Trade it in for another car

For a quotation, help, or advice contact us and ask to speak to one of our Business Managers.

What are the advantages of PCP?

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  • Monthly payments on a car financed by PCP are usually lower than if your car is financed by a Hire Purchase agreement.
  • If you decide not to buy the car, you can simply walk away when you've made all the payments.
  • Similar to PCH, you can drive away a new or used car every few years (dependent on the chosen term) without worrying about selling it on.
  • If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.

What should you consider when opting for PCP?

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  • If you want to buy the car you will need to pay your final balloon payment (the Guaranteed Future Value).
  • Similar to PCH, you will need to agree on a mileage allowance at the beginning of your contract and there may be excess mileage charges if you exceed this.
  • You won’t be able to sell the car without settling the finance.
  • You won’t own the car until you have made all of your repayments.
  • You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Can I settle my PCP agreement early?

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You can normally settle your agreement early by asking the finance company to provide you with a settlement figure. However, the finance company will require you to pay off the difference between what your car is worth, and what you still owe and there may be a difference which is known as negative equity. On the other hand, you may find that at the end of your term your car is worth more than the Guaranteed Future Value, which means you will have some positive equity to contribute towards your next car.

What is Hire Purchase (HP)?

Hire Purchase is a way to finance buying a new or used car. You will normally pay an initial deposit and will pay off the entire value of the car in monthly instalments. When all the payments are made, the Hire Purchase agreement ends, and you own the car outright.

What are the advantages of HP?

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  • You’ll be able to drive away a car that you may not have managed to buy outright.
  • Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
  • Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the car.

What should you consider when opting for HP?

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  • Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the car.
  • You won’t be able to sell the car without settling the finance.
  • You won’t own the car until you have made all of your repayments.
  • You’ll need to keep the car properly insured, maintained and in your possession until the full value is paid off.

Can I settle my HP agreement early?

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The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allows you to do just that. If you have got through two-thirds of the way through your finance agreement, the options to end the finance agreement early open up.

For a Hire Purchase agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the car early.

Under a Personal Contract Purchase agreement, you can also pay a settlement fee for bringing the agreement to an end early. After that, you can choose to hand the car back or you have a second option. Through a PCP agreement, you can take full ownership of the car by paying off the remaining Guaranteed Minimum Future Value also known as a balloon payment.

What is Personal Contract Purchase (PCP)?
What is Personal Contract Purchase (PCP)?
Personal Contract Purchase (PCP) is a finance product that allows you the opportunity to buy a new or a used car. It is similar to a Hire Purchase agreement as you will usually pay an initial deposit, followed by monthly instalments over a term typically between 18 to 48 months.What makes PCP different to Hire Purchase (HP) is that your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term.

How does PCP actually work?​

What are the advantages of PCP?

What should you consider when option for a PCP?

Can I settle my PCP agreement early?

What is Hire Purchase (HP)?
What is Hire Purchase (HP)?
​Hire Purchase is a way to finance buying a new or used car. You will normally pay an initial deposit and will pay off the entire value of the car in monthly instalments. When all the payments are made, the Hire Purchase agreement ends, and you own the car outright. ​

How does HP actually work?​

What are the advantages of HP?

What should you consider when option for a HP?

Can I settle my HP agreement early?