PCH vs PCP vs HP – Which Car Finance Option Should You Choose?

If you’re trying to decide between PCH, PCP or HP, it’s easy to get lost in car finance jargon. Each option works differently, and the best choice depends on whether you want to lease, buy, or own your car at the end.

This guide explains the difference between PCH and PCP, how hire purchase (HP) compares, and which might suit your driving habits and budget.

What is PCH (Personal Contract Hire)?

PCH is a car leasing agreement where you pay fixed monthly rentals for an agreed term, usually two to four years. You return the vehicle at the end — there’s no option to buy.

PCH works best if you:

• Prefer a brand-new car every few years

• Want predictable monthly costs with no balloon payment

• Don’t want to deal with resale or depreciation

PCH is currently one of the most popular ways to lease cars in the UK, especially for electric lease car deals.

What is PCP (Personal Contract Purchase)?

PCP is a car finance method that combines low monthly payments with flexibility at the end. You pay a deposit, then monthly instalments over two to four years.

At the end, you can either:

• Return the car

• Pay the balloon payment to keep it

• Part exchange for a new one

PCP is ideal if you:

• Want lower monthly payments than HP

• Might want to own the car later

• Like the idea of switching to a newer model

Be aware of mileage limits and condition charges, which can apply if you return the vehicle.

What is HP (Hire Purchase)?

HP is the most straightforward type of car finance. You pay a deposit, followed by monthly instalments until the car is fully paid off - then you own it outright.

HP is suitable if you:

• Want to own your car at the end

• Don’t mind slightly higher payments

• Plan to keep the vehicle for many years

It’s often used for used cars or buyers who prefer full ownership without end-of-term surprises.

PCP vs PCH – What’s the Difference?

The main difference between PCP and PCH is ownership.

• PCH is leasing – you rent the car with no option to buy.

• PCP is finance – you can buy the car by paying the final balloon payment.

If you want flexibility and might buy later, PCP fits best.
If you just want to lease and return, PCH is simpler.

Example: A driver wanting a personal car lease for three years with low commitment often chooses PCH.

PCP vs HP – Key Comparison

Both PCP and HP help you finance a car, but the end goal differs:

Choose PCP if you value flexibility.
Choose HP if you want to fully own your vehicle.

Which Option is Best for You?

• Choose PCH if you want an easy, no-ownership lease and a new car every few years.

• Choose PCP if you might want to buy the car later.

• Choose HP if you plan to keep the car long-term and prefer full ownership.

If your goal is to drive a new car with no long-term commitment, personal car leasing through PCH might be your best match.

Explore our latest car leasing offers and electric lease deals to find a vehicle that fits your budget and lifestyle.