PCP vs HP vs car leasing — which car finance is cheapest?
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In short. PCP is a finance agreement with an optional 'balloon' payment to own the car at the end. HP is a loan secured on the car — you own it at the end. Personal leasing is long-term rental — you never own the car.
The cheapest monthly payment is usually PCP or leasing, but the total cost over time and what you end up with at the end are very different. The right product depends on whether you actually want to own the car and how predictable your mileage is.
Last reviewed:
Side by side
Do you own the car?
PCP
Optional — pay the balloon to keep it
HP or leasing
HP: yes (after final payment) / Leasing: no
Typical deposit
PCP
10% (minimum varies)
HP or leasing
HP: 10%+ / Leasing: 3, 6 or 9 monthly payments upfront
Typical term
PCP
2–4 years
HP or leasing
HP: 3–5 years / Leasing: 2–4 years
Mileage limit
PCP
Yes (excess mileage charges)
HP or leasing
HP: no / Leasing: yes
Condition charges at end
PCP
Yes (fair wear and tear standard)
HP or leasing
HP: no / Leasing: yes
Servicing & MOT
PCP
Your responsibility
HP or leasing
Usually your responsibility
Voluntary termination right
PCP
Yes — after paying 50% of the total
HP or leasing
HP: yes (50% rule) / Leasing: no (early termination fee)
When PCP usually wins
- You want a lower monthly payment than HP
- You like swapping car every 3–4 years
- You're happy with mileage limits and end-of-deal condition checks
When HP or leasing usually wins
- Hire Purchase: you definitely want to own the car at the end
- Hire Purchase: your mileage is high or unpredictable
- Leasing: you treat the car as a service and want maintenance bundled in (with a maintenance pack)
Related quick answers
FAQ
- Is PCP the same as leasing?
- No. PCP includes an option to buy the car at the end by paying the Guaranteed Minimum Future Value (the 'balloon'). Leasing has no purchase option — you hand the car back.
- What is the 50% voluntary termination rule?
- Under section 99 of the Consumer Credit Act 1974, you can end a regulated PCP or HP agreement once you have paid (or agree to pay) at least half of the total amount payable. The car must be returned in fair condition.
- Is PCP a good way to buy an electric car?
- It can be — manufacturers often subsidise PCP rates on EVs, and the residual value risk sits with the finance company rather than you. Always check the total cost over the term, not just the monthly payment.