What's the difference between PCP and HP?

What is PCP?

PCP, or Personal Contract Purchase, is a way of spreading the cost of your car across monthly payments.

How PCP works

At the end of your contract, you can decide on whether you want to keep the car by paying one final pre-agreed ‘balloon’ payment, hand the car back to the dealership or use it as a deposit for your next car.

Your contract details will tell you if you purchased a car on PCP and if you did before the 28th January 2021, you could be eligible for a claim in the ongoing car finance reclaim.

What is HP?

HP, or Hire Purchase, is a way to finance a car with fixed monthly purchases as a way of spreading the cost of the car.

How HP works

A HP loan is secured against the car, so you don't own the vehicle until the last payment has been made. It usually requires a deposit and then you pay off the remaining cost of the car for a fixed amount of time.

The mis-sold car finance scandal does include those who have purchased or currently purchasing their car via hire purchase, and you can easily check by inputting your details here.

What is PCH?

Personal Contract Hire, or leasing, is a long-term rental agreement where you pay a set amount each month to use the car, similar to a Hire Purchase.

How PCH works

With this type of agreement, you are not able to purchase the car. Unfortunately, this type of car contract is not included in the mis-sold car finance claim.

PCP vs HP: Key differences

The main difference between a PCP and a HP is the way in which you can get full ownership of the vehicle.

Under a PCP agreement, you make lower monthly payments, although a ‘balloon’ payment will then be needed at the end of your agreement if you wish to fully own the vehicle.

Under a HP agreement, there is no ‘balloon’ payment, but your monthly payments will be higher.

HP vs PCH: Key differences

As with PCP v HP, the key difference between a HP agreement and a PCH agreement is with regard to the ownership of the vehicle.

A HP agreement involves monthly payments that work toward full vehicle ownership at the end of your agreement.

A PCH agreement, however, is a form of lease or rental. The payments you make each month are purely for the usage of the vehicle and do not give you any right or entitlement to the ownership of the vehicle.

What does your finance type mean for missold car finance claims?

Since the Financial Conduct Authority first began their investigation into discretionary commission arrangements, the scope of the mis-sold car finance scandal has broadened significantly.

This means that any kind of vehicle finance agreement in which commission was paid to the dealer – without the customer’s informed consent – could be eligible for compensation.

However, it must be noted that PCH agreements are not included.

It is very important you check the type of agreement you have, and see if you may be entitled to compensation.

How Slater and Gordon can help

At Slater and Gordon, our car claims experts are on hand to help with any queries you may have.

For more information, contact us today at carfinanceclaims@slatergordon.co.uk.