A Hire Purchase (HP) contract usually lasts 2-5 years, needs a deposit, and tends to have higher monthly payments. The car will be owned by you at the end of the contract, meaning it is the most straightforward option available.

Car Finance Explained

Entering a car finance contract is an important decision, so you need to know what options are available, and that you fully understand how each option works.

Olivia May Newton

Published: 10 May 2023

Updated: 10 May 2023

Read time: 3 minutes

Entering a car finance contract is an important decision, so you need to know what options are available, and that you fully understand how each option works.

The following guide should help you decide the right finance for you and your car.

Types of Car Finance

The three most popular car finance contracts available are Personal Contract Purchase (PCP), Hire Purchase (HP) and Personal Contract Hire (PCH).

Types of Car Finance	How it Works
Hire Purchase (HP)	A Hire Purchase (HP) contract usually lasts 2-5 years, needs a deposit, and tends to have higher monthly payments. The car will be owned by you at the end of the contract, meaning it is the most straightforward option available.
Personal Contract Hire (PCH)	A Personal Contract Hire (PCH) is a lease contract and usually lasts 3-4 years, needs an initial rental, and tends to have lower monthly payments. You have to hand the car back to the dealer at the end of your contract. PCH is often described as the most ‘stress-free’ car finance option available.
Personal Contract Purchase (PCP)	A Personal Contract Purchase (PCP) usually lasts 3-4 years, needs a deposit, and tends to have lower monthly payments than other forms of finance. It is the most flexible car finance with options available at the end of your contract to either: Purchase the car Hand the car back Part exchange

Top Tips When Considering Car Finance

Check your credit file before considering car finance – you can use our quick online credit check.
Ensure you have a deposit / initial rental amount saved to put down
Ensure sure you can afford the agreed monthly payments
Ensure sure you fully understand the car finance you are entering into
Have any questions you may have answered before you go ahead with the agreement

We hope that this car finance guide was useful. If you still have questions, we’re on hand to help.

We currently have car finance offers available on a wide range of cars – take a look today.