Car Finance Calculator: Work Out the True Cost of PCP, HP & a Loan

How does car finance work?

Car finance lets you drive a car now and pay for it over time — usually 2 to 5 years — through a deposit and fixed monthly payments that include interest. At the end of the term you either own the car outright (HP, loan), pay a final balloon to keep it (PCP), or simply hand it back (leasing).

Under the bonnet, every car finance deal is a loan plus a schedule. You borrow the price of the car minus your deposit, the lender charges interest at an APR, and you repay in equal monthly instalments. The maths is identical whether the brand calls it PCP, HP or a personal loan — only the structure of the final payment changes.

Most UK car finance is one of four types: PCP, HP, leasing (PCH) and a personal loan. They differ on one thing above all — whether, and how, you end up owning the car. For the full picture, read how car finance works.

Whichever you pick, the lender must be authorised by the FCA and run an affordability check before they agree to lend. The agreement is regulated under the Consumer Credit Act 1974, which also gives you rights such as early settlement and voluntary termination on PCP and HP.

The 4 types of car finance: PCP, HP, leasing and loans

There are four main ways to finance a car in the UK, and the right one depends on whether you want to own the car and how you use it. PCP and HP are secured on the car, a personal loan is unsecured, and leasing is simply long-term rental.

PCP keeps the monthly low by deferring a big chunk of the cost — the balloon, also called the Guaranteed Minimum Future Value (GMFV) — to the end. HP clears the whole price over the term, so you own the car once the last payment lands and there's no mileage limit. A loan buys the car outright from day one, so it's yours immediately and you can sell it whenever you like.

Leasing, or Personal Contract Hire (PCH), is different: you never own the car, there's no balloon and no option to buy, and you simply return it at the end. That makes it the simplest maths but the least flexible — you walk away with no equity.

PCP vs HP: which works out cheaper?

HP usually costs less overall, while PCP keeps the monthly lower. On a £20,000 car with £2,000 down over 48 months at 9.9% APR, HP runs about £452 a month and £23,695 in total.

The same car on PCP with an £8,000 balloon drops to roughly £314 a month — but the total to own it climbs to about £25,086, because you pay interest on that balloon for the whole term. That £1,400 gap is the price of the lower monthly, and it's the single most common surprise in car finance. See it broken down in PCP vs HP.

That doesn't make PCP a bad deal — it's a deliberate trade. You're paying for a lower monthly, the flexibility to walk away, and the chance the car is worth more than the balloon at the end. But if your aim is to own the car outright for the lowest total cost, HP usually wins on the same numbers.

What is APR — and why a low monthly can cost more

APR (Annual Percentage Rate) is the yearly cost of the finance, including the interest and any compulsory fees. It's the one number that lets you compare deals fairly, whatever the headline monthly.

A lower monthly payment usually means a longer term, and a longer term means more interest charged on the same balance — so the cheapest-looking deal is often the most expensive. Stretching a £15,000 loan from 4 years to 6 years can cut the monthly by £80 but add over £1,000 in total interest. Our APR calculator turns any monthly quote back into an APR and shows the total interest.

How much car finance can you get?

How much you can borrow depends on your income, your outgoings and your credit file — not a fixed limit. Lenders run an affordability check under FCA rules, weighing what you can comfortably repay each month.

There's no universal cap, but as a rough guide a £250 monthly budget over four years at 11.9% APR finances roughly a £10,620 car with a £1,000 deposit. Our eligibility estimate works out an indicative amount from a monthly budget, with no credit check and no impact on your file.

The biggest lever on how much you can borrow — and the APR you're offered — is your credit score. Improving it before you apply can unlock a higher borrowing figure and a noticeably cheaper rate. See what credit score you need.

Already paying? How to settle or change your deal

You can end most car finance early — settle it in full, overpay to clear it faster, hand it back, or sell the car. Your rights come from the Consumer Credit Act 1974 and apply to PCP and HP.

Each route has its own maths. Settling in full is a single lump sum that wipes out future interest; overpaying does the same job gradually; voluntary termination lets you walk away at the 50% mark with nothing more to pay (subject to condition and mileage terms on PCP).

• Settle in full: pay the outstanding balance now and save the remaining interest, with a statutory rebate. Work it out with the settlement calculator.
• Overpay: put extra in each month to cut the interest and shorten the term — see overpaying car finance.
• Voluntary termination: hand a PCP or HP car back once you've paid 50% of the total amount payable — see voluntary termination.
• Sell or part-exchange: settle the finance from the sale and keep any equity. Watch for negative equity if the car is worth less than you owe.

Mis-sold car finance: could you be owed money?

Millions of UK car finance agreements taken out between 2007–2024 may have been mis-sold through hidden discretionary commission. If yours was, you may be owed redress — and you can claim free yourself.

The FCA finalised a motor finance redress scheme (PS26/3) on 30 March 2026, after the Supreme Court ruled on commission disclosure on 1 August 2025. The scheme is legally challenged from 1 May 2026 (the FCA is defending), which may affect timing but not eligibility. The scheme expects to return around £7.5 billion in redress across roughly 12.1 million agreements, an average of about £829 each. Check your position with our compensation estimator and read the scandal explained.

Every figure on this is an estimate, not a promise — the scheme decides eligibility and the exact amount. And you can claim free yourself, directly with your lender and the Financial Ombudsman, with no claims firm taking up to a 30% cut.