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PCP finance, hire purchase and car loans: how does car finance work, what pcp deals and hire purchase cars actually cost, and how to finance a car without guessing

Three agreements cover almost every financed car in the UK, and they differ in who owns the car and what happens at the end rather than in the monthly figure the advert leads with. This section explains each one, the statutory rights that attach to it, and how to read a quote before you sign. We arrange nothing and introduce nobody: these pages are the reading, not the sale.

agreements cover almost every financed car in the UK
3
to withdraw from a regulated credit agreement, Consumer Credit Act 1974 s.66A
14 days
of the total price is the voluntary termination ceiling, Consumer Credit Act 1974 s.100
50%

Figures in this panel are the statutory rights that attach to a regulated motor finance agreement, quoted from the Consumer Credit Act 1974 itself and linked in the sources below. KnownVehicle is not authorised for credit broking and introduces no lender: nothing on these pages is a quote, an application or a recommendation.

Everything in this section

The three agreements, and what separates them

  1. Hire purchase: you are hiring until the last payment. Under hire purchase the lender buys the car and hires it to you. Title passes only when the final payment and the option-to-purchase fee are paid. Everything is repaid across the term, so the monthly figure is the highest of the three, and there is nothing left to settle at the end.
  2. PCP: a hire purchase agreement with most of the car deferred. A personal contract purchase is legally a hire purchase agreement too, but a large slice of the car's value is deferred to a final optional payment, the guaranteed minimum future value. Monthly payments are lower because you are financing depreciation rather than the whole car. At the end you pay the balloon, hand the car back, or part-exchange whatever equity is left.
  3. A personal car loan: you own the car from day one. A personal loan is unsecured credit paid into your account. You buy the car outright, so it is yours immediately and you can sell it whenever you like. The trade-off is that the debt is not attached to the car, so handing the car back is not an option and the rate is priced on you rather than on the asset.
  4. Read the total amount payable, never the monthly figure. Two quotes with the same monthly payment can differ by thousands once term, deposit and the final payment are lined up. The figure that compares agreements is the total amount payable across the whole term plus any fees, which a regulated quote has to state.

Common questions

Is PCP the same as hire purchase?
Legally, usually yes: a PCP is normally a regulated hire purchase agreement with a large optional final payment. The consequence matters, because the Consumer Credit Act rights that apply to hire purchase, including voluntary termination, apply to a PCP too.
Can I pay a car finance agreement off early?
Section 94 of the Consumer Credit Act 1974 gives the debtor under a regulated agreement the right to discharge the debt at any time by notice and payment, less the rebate the Act allows. The lender has to give you a settlement figure on request.
Do I own a car that is on finance?
Not under hire purchase or a PCP. The lender holds title until the final payment, which is why an outstanding-finance marker follows the car rather than the seller and why a check before you buy privately matters.
Does this site arrange car finance?
No. Nothing here introduces you to a lender or a broker and no application is taken. Arranging consumer credit is a regulated activity and we are not authorised for it, so these pages explain the market and stop there.

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Sources

Cite or embed this figure

The median advertised price of a single full car check in the GB car check market was £14.99 in August 2026, across 2 verified vendor product pages recorded in KnownVehicle Car Check Price Index.

Cite as: "KnownVehicle Car Check Price Index", updated 2026-08-26, https://knownvehicle.com/finance/.

Embed this figure (plain HTML, no scripts)
median advertised price of a single full car check · the GB car check market · August 2026

£14.99

Middle 50%£9.99 – £19.99
verified vendor product pages2

Source: KnownVehicle Car Check Price Index

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