Three types of car finance

2 min read

Purchasing a brand-new vehicle is a huge investment. With various risks and benefits to each type of finance option, choosing the right one to suit your family, budget or business is a big decision. The world of car finance can seem complicated, so here is our guide to understanding your finance options.
Hire purchase (HP)

Hire purchase, or HP, is a method of monthly payment car finance. You will choose your vehicle, put down an initial deposit, and make monthly payments to the finance company. You won’t own the car unless you complete your payments and pay an additional cost at the end of the term. Once your agreement reaches its end, you can opt to purchase the car and only then do you legally own it. The agreement typically can’t be terminated early and if you fail to make the monthly payments, the finance company may recover the car.

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Understanding how depreciation works is also important when considering your options.


Leasing can help you drive away in a brand-new car without the price tag. Just as you rent a home, you can lease a vehicle. You will never own the car; instead, you will simply pay a monthly ‘rental’ fee to drive it. When your lease ends, you can return it to the finance company to upgrade it or walk away. Typically, it is a cheaper option compared to other types of finance, but you will have to monitor your mileage based on your agreement. For those looking for short- or long-term van hire Bristol and the surrounding area, companies such as can help.

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PCP deals

PCP (personal contract purchase) loans are slightly more complicated, but they are ideal for those who regularly upgrade their car. You will make a non-refundable deposit to drive your new vehicle away and borrow the rest of the cost, paying it back plus interest and depreciation on a monthly basis. At the end of the term, you can buy your car outright, return it, or upgrade and replace it with a new deal.

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