Cash, Bank Loan, HP or PCP: The Ways to Pay for a Car

There are four main ways to pay for a car. None of them is right for everyone, and which suits you depends on what you can afford each month, how long you’ll keep the car and whether you want to own it at the end.

Here’s how each one works, in plain English. It’s a guide to the options, not advice on which one to choose.

Cash

The simplest. The car’s yours outright from day one, with no interest, no credit check and no monthly payments. The downside is a big chunk of savings tied up in something that loses value, and less left in reserve if something else comes up.

Personal loan

You borrow from a bank or lender, then buy the car as a cash buyer. Personal loans are usually unsecured, so the car is yours from the start. The rate you’re offered depends on your credit history, and you pay it back in fixed monthly amounts over an agreed term.

Hire purchase (HP)

HP spreads the cost of the car over a fixed term, usually after a deposit. You’re hiring the car, so it belongs to the finance company until the last payment is made, sometimes including a small option-to-purchase fee, and then it’s yours. Monthly payments are usually higher than PCP, because you’re paying off the whole value of the car.

Personal contract purchase (PCP)

PCP also starts with a deposit and monthly payments, but part of the car’s value is held back to the end as an optional final payment. That keeps the monthly payments lower.

At the end you can pay the final amount and keep the car, hand it back, or put any equity towards another car. There’s an agreed mileage limit, and you’ll pay extra if you go over it or if the car comes back in poor condition.

Things to compare, whichever you choose

• The total amount payable, not just the monthly payment
• The APR
• The deposit
• Any fees, and the cost of settling early
• With PCP, the mileage limit and the size of the final payment

How we do it at GT

We’re an FCA regulated dealership and can arrange finance on our cars. If you’d like to look at it, you can check your eligibility on our finance page or talk it through with the team.

We work with a panel of lenders and don’t charge a fee for our consumer credit services. GT Automotive Group Ltd is an appointed representative of ITC Compliance Ltd, which is authorised and regulated by the Financial Conduct Authority (firm reference 313486). We are a credit broker, not a lender.

Check your finance eligibility →