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Car Finance Comparison Calculator

Compare PCP, HP, personal loan, and cash purchase side by side — monthly payments, total cost, and which option saves the most.

Last updated 10 March 2026 Standard loan amortization (M = P × r(1+r)^n / ((1+r)^n − 1)) for HP and personal loans. PCP uses modified formula with balloon: M = r × (PV − FV/(1+r)^n) / (1 − (1+r)^−n). True Cost = Total Paid + Opportunity Cost, where opportunity cost is the investment returns forgone by spending money earlier (upfront deposit and each monthly payment lose time to compound). Cash purchase has the highest opportunity cost because the full price is spent on day one.

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Car Details

Display currency

On-the-road price

$

Upfront payment or trade-in value

$

How long you'll finance the car

months

What your cash could earn if not spent on the car

%
Cash has the lowest true cost

True cost = total payments + the investment returns you give up by spending money earlier. Assumes 4.5% annual return on uninvested cash.

PCP

True Cost

$32,432

Monthly Payment

$370/mo

Total paid$30,280
Interest$5,280
Opportunity cost$2,153

Lower monthly payments, but a $10,000 balloon is due at month 48 to keep the car.

Hire Purchase

True Cost

$32,322

Monthly Payment

$559/mo

Total paid$29,325
Interest$4,325
Opportunity cost$2,998

Higher monthly payments than PCP, but you own the car at the end with no final payment.

Personal Loan

True Cost

$30,509

Monthly Payment

$524/mo

Total paid$27,666
Interest$2,666
Opportunity cost$2,843

You own the car outright immediately. Often the lowest APR with good credit.

Best Value

Cash

True Cost

$29,920

Monthly Payment

—

Total paid$25,000
Interest$0
Opportunity cost$4,920

No interest, but you lose $4,920 in potential investment returns over 48 months.

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True Cost Breakdown

Payments + opportunity cost (what your cash could have earned)

MetricPCPHire PurchasePersonal LoanCash
Monthly Payment$370$559$524—
Total Paid$30,280$29,325$27,666$25,000
Interest$5,280$4,325$2,666$0
Opportunity Cost$2,153$2,998$2,843$4,920
True Cost$32,432$32,322$30,509$29,920
Own at End?Yes ($10,000 balloon at end)YesYes (from day one)Yes (immediate)

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How it works

Which Car Finance Option Is Right for You?

Choosing how to pay for a car is one of the biggest financial decisions most people make every few years. The difference between the cheapest and most expensive finance option on a £25,000 car can easily exceed £3,000 in interest — money that stays in your pocket with the right choice.

This calculator compares four ways to pay:

MethodYou Own the Car?Monthly PaymentTotal CostBest For
PCPOnly if you pay the balloonLowestHighest (if keeping)Wanting a new car every 3–4 years
HPYes, at the endMediumMediumWanting to own with fixed payments
Personal LoanYes, from day oneMediumUsually lowestBest rates, full ownership immediately
CashYes, immediatelyNoneCar price (no interest)Avoiding all borrowing costs

How PCP Works

PCP (Personal Contract Purchase) is the most popular car finance in the UK — over 80% of new cars are financed this way. Here’s the structure:

  1. Deposit — typically 5–15% of the car price
  2. Monthly payments — cover the car’s depreciation (not the full value), so they’re low
  3. Balloon payment (GMFV) — a large final payment (30–50% of the car price) if you want to keep the car

At the end of the term, you choose: pay the balloon and keep the car, hand it back, or use any equity as a deposit on a new deal.

Important: PCP charges interest on the full finance amount throughout the term, not just the depreciation portion. That’s why PCP total cost is often the highest despite having the lowest monthly payment.

The Hidden Cost of Low Monthly Payments

PCP’s monthly payment is attractive because you’re only paying off part of the car. But the interest is calculated on the whole amount you borrowed:

  • Finance amount: £22,500 (after £2,500 deposit on a £25,000 car)
  • Interest charged on: the full £22,500 for the entire term
  • Principal repaid: only £12,500 (the depreciation portion)
  • Still owed at end: £10,000 balloon — on which you’ve been paying interest all along

This is why the total cost of PCP (keeping the car) is almost always higher than HP or a personal loan for the same car.

When Each Option Wins

PCP wins if: you want the newest model every 3–4 years and never intend to pay the balloon. You’re effectively renting the car with an option to buy.

HP wins if: you want to own the car at the end with fixed monthly payments and no balloon surprise. Simple and predictable.

Personal loan wins if: you want the lowest total borrowing cost. Bank and credit union rates are usually 2–3% below PCP/HP. You own the car from day one and can sell it whenever you want.

Cash wins if: you have the money available without depleting your emergency fund. Zero interest is hard to beat — unless your investments earn more than the loan rate.

Tips for Getting the Best Deal

  1. Get pre-approved for a personal loan or credit union auto loan before visiting the dealer. This gives you a rate to negotiate against.
  2. Compare total amount payable, not just monthly payment or APR. A lower monthly payment over a longer term can cost thousands more.
  3. Negotiate the car price first, then discuss finance. Dealers sometimes inflate the price on 0% deals to recover the interest subsidy.
  4. Check your credit score before applying. A few points can mean the difference between 5.6% and 8.9%.
  5. Consider the term length — shorter terms mean higher monthly payments but significantly less total interest.

Real-World Examples

1

£25,000 car with £2,500 deposit over 4 years

Car Price: 25,000 Deposit: 2,500 Term Months: 48 Pcp Apr: 7.9 Pcp Balloon Pct: 40 Hp Apr: 8.9 Loan Apr: 5.6

PCP at 7.9% with a 40% balloon (£10,000): monthly payment ~£370, total paid ~£30,280, interest ~£5,280. HP at 8.9%: monthly ~£558, total ~£29,295. Personal loan at 5.6%: monthly ~£523, total ~£27,620. Cash: £25,000, no interest but ~£4,920 opportunity cost (if invested at 4.5% over 4 years). The calculator's 'true cost' (total paid + opportunity cost) shows cash (~£29,920) still edges ahead of the personal loan (~£30,470) at these rates — but if your investment returns exceed the loan APR, financing and investing the difference wins.

2

£15,000 used car, short 2-year term

Car Price: 15,000 Deposit: 3,000 Term Months: 24 Pcp Apr: 9.9 Hp Apr: 8.9 Loan Apr: 6.5

On a shorter term, the total interest is lower across all options. Personal loan at 6.5%: monthly ~£535, total ~£15,840, interest ~£840. HP at 8.9%: monthly ~£548, total ~£16,150, interest ~£1,150. PCP at 9.9% with 40% balloon (£6,000): monthly ~£325, total ~£16,810 (including balloon), interest ~£1,810. Cash: £15,000 plus ~£1,380 opportunity cost at 4.5%. The personal loan is cheapest in both total paid and true cost, and on a 2-year term the monthly difference between HP and personal loan is only ~£13.

3

$35,000 new car in the US with 0% dealer deal

Car Price: 35,000 Deposit: 5,000 Term Months: 60 Hp Apr: 0 Loan Apr: 6.8

A 0% dealer HP deal means monthly payments of $500 with zero interest — total paid equals the car price ($35,000). The personal loan at 6.8% over 60 months: $594/month, total $38,640, interest $3,640. In this case, the 0% deal beats the personal loan by $3,640. However, dealers sometimes offer a choice between 0% financing or a cash rebate — if the rebate exceeds the interest on a bank loan, taking the rebate and financing elsewhere is better.

Frequently Asked Questions

What is the cheapest way to buy a car?
Cash is always cheapest in absolute terms — you pay zero interest. But it requires having the full purchase price available and means tying up capital that could earn returns elsewhere. Among finance options, a personal loan from a bank or credit union usually has the lowest APR (5–7% for good credit in 2026), making it the cheapest way to borrow. PCP has the lowest monthly payments but the highest total cost if you exercise the balloon to keep the car. HP sits between the two. The right choice depends on whether you prioritise low monthly payments (PCP), lowest total cost (personal loan), or no debt at all (cash).
What is PCP (Personal Contract Purchase)?
PCP is a UK car finance product where you finance the car's depreciation, not its full value. You pay a deposit, then monthly payments over 2–4 years, followed by a large 'balloon payment' (the Guaranteed Minimum Future Value or GMFV) if you want to keep the car. If you don't pay the balloon, you hand the car back. PCP has the lowest monthly payments of any finance option because you're only paying off part of the car's value. The trade-off: you don't own the car unless you make the final balloon payment, and you'll typically face mileage limits and condition requirements.
Is PCP or HP better value?
HP is almost always cheaper in total cost because you pay off the entire car value and avoid the balloon payment (which accrues interest throughout the PCP term). HP monthly payments are higher because you're paying down more principal each month. PCP is better if you want low monthly payments and plan to change cars every 3–4 years (returning the car instead of paying the balloon). HP is better if you want to own the car outright at the end for the lowest total price. Both charge interest on the full finance amount — the difference is that PCP leaves a large balance (the balloon) still owing at the end.
Why is a personal loan often cheaper than dealer finance?
Banks and credit unions compete on rate. In the UK, best-buy personal loans are around 5.6% APR — often 2–3% lower than PCP or HP deals. The loan is unsecured (the car isn't collateral), which means you own the car outright from day one. Dealers can offer 0% APR on new cars, but these promotional deals often come at the expense of a larger purchase price — the 'interest' is baked into the car price. Always compare the total amount payable, not just the APR. One exception: credit unions in the US sometimes offer rates below 5% for auto loans — always check before accepting dealer financing.
What is the balloon payment in PCP and what happens if I can't pay it?
The balloon payment (GMFV) is the amount the finance company guarantees the car will be worth at the end of the PCP agreement — typically 30–50% of the original price. If you want to keep the car, you pay this amount in a lump sum or refinance it. If you can't afford it, you have three options: hand the car back (no further cost if it's in good condition within mileage limits), use any positive equity as a deposit on a new PCP, or refinance the balloon amount into a new loan. The GMFV is set conservatively by the lender, so the car's actual market value is often higher — this difference is your 'equity'.
Should I buy a car with cash or finance it?
If you have the cash and it won't deplete your emergency fund, buying outright saves you all interest costs. But there's an opportunity cost: money spent on a car can't earn investment returns. On a £25,000 car, the opportunity cost of cash at a 5% return over 4 years is roughly £5,500 — comparable to the interest on a personal loan at 5.6%. Financing keeps your capital invested but costs interest. The break-even point is when your expected investment return equals the loan APR — if you can earn more from investing than the loan costs, financing and investing the difference can make sense mathematically. In practice, most people should avoid depleting savings below 3–6 months of expenses.
What APR should I expect for car finance in 2026?
In the UK: PCP deals range from 0% (manufacturer promotions on new cars) to 9.9% for standard deals and 15–25% for poor credit. HP is similar. Personal loans start at 5.6% for the best rates. In the US: new car loans average 6.5% for excellent credit (750+), 8–11% for good credit, and 13%+ for fair credit. Used car rates are typically 2–4% higher. Credit union auto loans often beat bank and dealer rates by 1–2%. Always get pre-approved from your bank or credit union before visiting a dealer — it gives you negotiating leverage.

Sources & Methodology

How this is calculated
Standard loan amortization (M = P × r(1+r)^n / ((1+r)^n − 1)) for HP and personal loans. PCP uses modified formula with balloon: M = r × (PV − FV/(1+r)^n) / (1 − (1+r)^−n). True Cost = Total Paid + Opportunity Cost, where opportunity cost is the investment returns forgone by spending money earlier (upfront deposit and each monthly payment lose time to compound). Cash purchase has the highest opportunity cost because the full price is spent on day one.

Data Sources

Last verified: 10 March 2026

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