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 also often referred to as the Guaranteed Minimum Future Value (GMFV).

• 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 Minimum Future Value then you can use that equity towards a deposit on a new car.

• 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.

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.?

Hire Purchase (HP) is a finance product that allows you the opportunity to buy a new or used car.

With a Hire Purchase agreement, you will usually pay an initial deposit, followed by fixed monthly instalments over a term typically between 24 and 60 months.

Unlike Personal Contract Purchase (PCP), your monthly payments cover the full value of the vehicle, rather than just its depreciation. This means there is no final balloon payment at the end of the agreement. Once you have made all of your monthly payments and any applicable option to purchase fee has been paid, you will become the owner of the vehicle.

• 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.

• 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.

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.

Personal Contract Hire (PCH), commonly known as personal leasing, is a long-term car rental agreement for private individuals. You pay an initial upfront fee followed by fixed monthly payments over 2 to 5 years. Since you are renting, you do not own the car and must return it at the end of the term.

• Zero Ownership: No Option to Buy: Unlike Personal Contract Purchase (PCP), PCH does not offer a balloon payment to own the vehicle. Once the contract ends, the car is handed back to the finance provider.
• Depreciation Risk: Because you are only renting the car, you are not impacted if the vehicle loses value faster than expected.
• Financial Obligations and Budget - Initial Rental: You will need to pay an upfront fee (often equivalent to 3, 6, or 9 months of your regular payments). A higher initial payment lowers your monthly outgoings.
• Running Costs: Road tax (Road Fund License) is usually included, but you are completely responsible for fuel, fully comprehensive car insurance, and maintenance.
• Maintenance Packages: You can usually bundle servicing and replacement tyres into your monthly payment for an additional cost

Business Contract Hire (BCH) is a long-term vehicle leasing agreement specifically for businesses, sole traders, and partnerships. Your company pays a fixed monthly fee to use a brand-new vehicle over a set term (typically 2 to 4 years) and an agreed annual mileage limit.

• Preserved Cash Flow: Rather than tying up tens of thousands of pounds purchasing a vehicle outright, BCH requires a low initial rental followed by fixed monthly payments. This leaves working capital free to invest in other areas of the business.
• VAT Efficiency: Businesses can be highly tax-efficient with BCH. VAT-registered companies can generally reclaim 50% of the VAT on the finance element for cars and up to 100% for commercial vehicles. Up to 100% of the VAT on optional maintenance packages can also be reclaimed.
• Predictable Budgeting: All motoring costs, including road tax, can be bundled into a fixed monthly payment. You can also add a comprehensive maintenance package, eliminating unexpected repair bills and making expense forecasting straightforward.
• No Depreciation or Disposal Hassle: Because you do not own the vehicle, you avoid the financial risk of depreciation. At the end of the agreement, you simply hand the vehicle back, avoiding the administrative headache of trying to sell or trade in the asset.
• Tax Deductible: Monthly rentals are usually treated as a business expense, meaning the payments can be offset against your annual Corporation Tax.
• Professional Image: BCH allows your employees to drive modern, reliable vehicles. Keeping your fleet up-to-date helps maintain a professional image and ensures your team benefits from the latest safety and fuel-efficiency technology.

• Financial Obligations & Budget: Initial Rental: You typically pay an upfront advance (e.g., equivalent to 3 to 9 months' worth of payments) to secure the lease.
• Fixed Costs: Your monthly outgoings are fixed, making cash flow forecasting predictable. Road tax (Vehicle Excise Duty) is usually included.
• No Ownership: You do not own the vehicle, which means there is no option to purchase it at the end of the contract.
• Tax Benefits: VAT Reclaim: VAT-registered businesses can reclaim 100% of the VAT on commercial vehicle leases, or 50% on company cars used for both business and personal travel.
• Corporate Tax: Monthly rentals can typically be offset against your business's annual corporation tax or self-assessment returns, though CO2 emissions may affect the exact amount you can deduct.
• Usage & Mileage Restrictions: Annual Mileage Cap: You must predict your annual mileage. If you exceed the limit, you will face an excess mileage charge (calculated on a pence-per-mile basis). Conversely, overestimating means you are paying for unused miles.
• No Modifications: Because the finance company owns the vehicle, it cannot be permanently modified (e.g., permanent sign-writing on vans).