Used car finance explained: PCP vs HP vs personal loan
6 min read · Updated 1 September 2026
Most used cars are bought on finance, and the right product depends less on the interest rate than on how long you plan to keep the car and whether you want to own it at the end. Here's how the main options compare, in plain English.
Hire Purchase (HP)
You pay a deposit, then fixed monthly payments over the term (typically 1–5 years). Once you've made the final payment — and usually a small Option to Purchase fee — the car is yours outright. Payments are higher than PCP for the same car because you're clearing the whole value, but there's no large lump sum at the end and no mileage limit.
HP suits buyers who want to own the car and keep it for years.
Personal Contract Purchase (PCP)
PCP splits the cost into a deposit, lower monthly payments, and a large optional final payment (the 'balloon', based on the car's predicted future value). At the end you can pay the balloon to keep the car, hand it back, or part-exchange any equity into your next car.
Monthly payments are lower, but you don't own the car unless you pay the balloon, and there are annual mileage limits with charges if you exceed them.
Personal loan
An unsecured personal loan from a bank pays for the car in full, so you own it from day one and can sell it whenever you like. The car isn't tied to the finance, and there are no mileage limits. The trade-off is that monthly payments are usually higher than PCP, and the rate depends on your credit profile.
Which should you choose?
Keeping the car long-term and want to own it? HP or a personal loan. Prefer lower payments and like changing car every few years? PCP. Want total flexibility to sell any time? A personal loan.
Whatever you choose, compare the total amount payable and the APR, not just the monthly figure. The finance estimate on each Carous listing is a representative illustration to help you compare — the dealer will give you a personalised, regulated quote.
Frequently asked
Does a bigger deposit reduce the cost?
A larger deposit lowers the amount you borrow, so it reduces monthly payments and usually the total interest. It can also help you access better rates.
Can I pay finance off early?
Usually yes. Regulated agreements let you settle early, though there may be interest adjustments. Ask the dealer or lender for a settlement figure.
Are the monthly figures on Carous a real quote?
No — they're representative illustrations to help you compare cars. Your actual quote depends on the deposit, term and a status check, and comes from the dealer or lender.