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How to Use the PCP Calculator
- Enter the car price — the full on-the-road price of the vehicle.
- Enter your deposit — the cash or trade-in value you're putting down.
- Set the term — typically 24, 36, or 48 months on a PCP deal.
- Enter the APR — the representative rate quoted by the lender.
- Enter the balloon — also called the GMFV (Guaranteed Minimum Future Value), the amount due at the end if you want to keep the car.
- Click "Calculate" — the tool shows your monthly PCP payment, the balloon, total repayable, and total interest.
What is PCP finance?
Personal Contract Purchase (PCP) is a form of UK car finance that dominates new-car sales because it produces much lower monthly payments than Hire Purchase on the same vehicle. Instead of paying off the full cost of the car, you only finance the depreciation — the difference between the purchase price and a Guaranteed Minimum Future Value (GMFV) set by the lender at the start of the deal. At the end of the agreement you have three clear options: hand the car back and walk away with nothing more to pay (subject to fair wear, tear, and the contracted annual mileage), pay the balloon to own the car outright, or use any equity between the GMFV and the car's actual market value as a deposit on a new PCP deal.
The monthly payment is calculated using the standard amortisation formula adjusted for a deferred balloon: M = (PV × (1+r)^n − FV) × r / ((1+r)^n − 1), where PV is the amount financed (price minus deposit), FV is the balloon, r is the monthly interest rate (APR ÷ 12), and n is the number of months. Interest is charged on the full outstanding balance each month, including the portion that will eventually be settled or walked away from as the balloon. That's why PCP can look cheap on the monthly but costs more in total interest than HP on the same car.
PCP vs HP: which is better for you?
PCP wins on monthly cash flow. On a £25,000 car at 9.9% APR over 36 months with a £3,000 deposit and a £9,500 balloon, the monthly PCP payment is around £350. The same car on HP over the same term would be closer to £600 per month — that's a £250 monthly difference, £9,000 across the full term. For many UK buyers that gap is the difference between affording a car and not.
HP wins on total cost. Because PCP defers a chunk of the capital to the end, you pay interest on it the whole way through. Over the life of a typical 36-month PCP deal, you'll pay £1,000 to £2,500 more in interest than the equivalent HP agreement on the same car at the same rate. If you always intend to keep your car long-term, HP is nearly always cheaper.
PCP also wins on flexibility. At the end of the term you have a clean exit route — just hand the car back — which protects you from depreciation risk. If the used-car market collapses and your car is worth less than the GMFV, that's the lender's problem, not yours. Over the last decade this has rarely happened in the UK; most cars at the end of PCP have been worth more than the balloon, giving the buyer equity to roll into the next deal.
How the balloon payment (GMFV) is set
The lender sets the GMFV at the start of the deal based on three things: the car's predicted resale value at the end of the term, your contracted annual mileage, and the length of the agreement. A 10,000-mile-per-year contract produces a higher GMFV than a 20,000-mile-per-year contract on the same car, because higher mileage hurts resale value. If you exceed the mileage cap you'll pay a per-mile penalty at hand-back — typically 8p to 25p per extra mile — so be realistic when you sign.
Popular family cars like the Volkswagen Golf or Ford Puma typically hold 40% to 50% of their list price after three years at 10,000 miles per year. Luxury and performance cars often hold less, sometimes as low as 30% to 35%, because they depreciate faster. Electric cars are a wild card in 2026 — early models lost value quickly but newer EVs with 300+ mile range are starting to hold their value better as the used market matures.
How to make PCP work for you
Three rules of thumb for getting value out of PCP. First, put down the smallest deposit that gets you the rate you want — money sitting in a savings account at 4.5% AER works harder than money knocking a few pence off a monthly payment. Second, pick a mileage allowance slightly above what you actually drive. Paying a couple of quid extra per month to avoid end-of-term excess-mile charges almost always pays off. Third, review the car's equity position 3 to 6 months before the term ends. If the car is worth more than the balloon at that point, a dealer may let you roll the equity into a new PCP deal early, which effectively swaps you into a new car without extra deposit.
Avoid rolling negative equity into a new PCP deal — that's a trap that compounds over time and leaves you paying for cars you no longer own. If your current car is worth less than the balloon (or the settlement figure on an early termination), it's almost always better to hand it back under the Voluntary Termination clause or pay the settlement in cash before starting a new deal.
Voluntary Termination: your exit option
Under the Consumer Credit Act, you have the right to hand back the car once you've paid at least 50% of the total amount payable (including the balloon). This is called Voluntary Termination (VT). It's a legal protection, not a favour from the lender. If you exercise VT, the lender must accept the car back in reasonable condition with no further payments beyond the mileage excess and any damage charges. On a typical PCP deal you hit the 50% mark somewhere between months 18 and 24 of a 36-month deal, because the balloon is included in the total amount payable. Use the calculator to check exactly when your 50% point falls.
If you're considering VT, talk to your lender and get the settlement figure in writing. VT is not the same as a voluntary surrender — make sure the paperwork specifies VT under Section 99 of the Consumer Credit Act 1974. Done properly, VT doesn't hurt your credit score the way a default does.
How is a PCP monthly payment calculated?
PCP monthly payments are calculated using a modified amortisation formula that accounts for the deferred balloon: M = (PV × (1+r)^n − FV) × r / ((1+r)^n − 1), where PV is the amount financed (car price minus deposit), FV is the balloon / GMFV, r is the monthly interest rate (APR divided by 12), and n is the term in months. Interest is charged on the full outstanding balance each month until the balloon is settled or the car is handed back.
What is GMFV on a PCP deal?
GMFV stands for Guaranteed Minimum Future Value — the lender's estimate of what the car will be worth at the end of the PCP term, based on your contracted annual mileage. It's also called the balloon payment. You pay the GMFV only if you want to keep the car; otherwise you hand the car back with nothing further to pay, subject to fair wear and tear.
Can I pay off PCP early?
Yes. Under the Consumer Credit Act you can settle PCP early at any time. The lender will provide a settlement figure that includes the remaining capital plus a rebate on future interest (capped at 58 days' interest as an early-settlement charge). You can also use Voluntary Termination once you've paid 50% of the total payable, which lets you hand the car back with no further liability beyond mileage and damage.
What happens if I exceed the mileage on a PCP?
You pay an excess mileage charge at hand-back, typically 8p to 25p per mile depending on the car. On a popular family car with a 10,000-mile-per-year contract, going 3,000 miles over at 15p/mile would cost £450 at the end of the deal. Always pick a mileage allowance slightly above what you expect to drive — the extra monthly premium is almost always cheaper than excess-mileage charges.
Is PCP cheaper than HP?
PCP has lower monthly payments than HP on the same car because you're only financing the depreciation, not the full price. However, PCP is usually more expensive in total interest because interest is charged on a larger outstanding balance throughout the term. If you plan to keep the car at the end, HP is typically £1,000 to £2,500 cheaper overall on a £25,000 car over 36 months.
Can I get PCP with bad credit?
Yes, specialist subprime lenders offer PCP to customers with poor credit, but APRs are typically 20% to 35% rather than the 6% to 12% offered to prime borrowers. A larger deposit (20% or more) significantly improves approval chances. Some subprime lenders only offer HP rather than PCP for bad-credit customers because HP is simpler to repossess if payments fail.
What does "fair wear and tear" mean at PCP hand-back?
Fair wear and tear is the expected level of cosmetic and mechanical deterioration from normal use over the term. The BVRLA (British Vehicle Rental and Leasing Association) publishes an industry-standard guide that specifies what counts as fair (small stone chips, light interior wear) versus chargeable damage (kerbed alloys, dents bigger than a £1 coin, tears in upholstery). Get a pre-inspection 4 weeks before hand-back so you can fix chargeable damage yourself at lower cost than the lender would charge.
Do I own the car during a PCP agreement?
No. During a PCP agreement, the lender owns the car — you are hiring it with an option to buy at the end. You cannot sell the car without first settling the finance in full. Once you pay the balloon at the end of the term, ownership transfers to you. If you hand the car back, ownership stays with the lender.
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