Personal Contract Purchase vs HP. Know the Difference Yourself.
When it comes to financing your car, there are quite a few ways in the UK through which you can get a car for yourself. Any normal customer can get confused between the different procedures. Hence, we have made it easier for you to distinguish between the methods and choose a smooth way to finance a car. The two highly major ways of getting your car financed are Personal Contract Purchase (PCP) and Hire Purchase (HP). Most buyers looking for a car can find these methods overlapping. The Personal Contract Purchase is similar to Hire Purchase in some ways. You pay an initial deposit while getting a car and then pay the rest of the amount in small monthly instalments.
However, in Personal Contract Purchase, the monthly instalments you pay are payments for the depreciation of the car rather than the whole amount of the car. Before signing your Personal Contract Purchase a future value of the car is estimated. This value is the price of the car at the end of your contract. The difference between the initial price and the depreciated price is the value you will be paying off monthly.
After you are done with the instalments, you are given three options by the respective company. You can either buy the car by paying the last instalment, or you can hand the car back in, or you can opt for a part exchange for the car. This method is hassle free and smooth. There is only one significant drawback. You need to set a mileage limit before signing the contract, and if it exceeds, then you pay a large amount for that.
Hire Purchase is also a contract that you sign with your finance company. You pay an initial amount, and then monthly instalments follow. However, when you have completed all your monthly payments, you end up with the car. You do not need to give a mileage estimate and end up driving your car without paying the full amount. The monthly payments can be higher than those of Personal Contract Purchase. You won't be able to sell your car without completing your payments. After highlighting the differences, we leave it up to you to choose the best option for yourself.