Car Finance Calculator
What's My Car Payment?
Compare PCP and HP finance options to find the best deal for your new car.
Representative example: Borrowing £20,000 over 48 months with a representative APR of 9.9%, the amount payable would be £503 per month, with a total cost of credit of £4,144 and a total amount payable of £24,144.
Understanding Car Finance
What you're actually signing up for
How car finance works
Car finance lets you spread the cost of a vehicle over monthly payments rather than paying upfront. Most agreements are secured against the car itself, meaning the lender can repossess it if you miss payments. You typically don't own the car until the final payment is made, or, on PCP, until you pay the optional balloon payment at the end.
Deposit
An upfront payment that reduces the amount you need to borrow. A larger deposit usually means lower monthly payments and a better rate.
Monthly payments
Fixed payments over the agreed term, covering interest and either the full loan (HP) or a portion of it (PCP).
End of agreement
On HP you own the car outright. On PCP you choose: pay the balloon and own it, hand it back, or part-exchange into a new deal.
PCP explained
- Lower monthly payments: because you're only financing the depreciation, not the car's full value.
- Balloon payment (GFV): a large optional final payment set at the start, based on the car's Guaranteed Future Value.
- At the end: pay the balloon and own it, hand it back with nothing owed (if within mileage), or part-ex into a new deal.
HP explained
- Equal payments throughout: the full loan is split evenly, so there's no large final payment.
- Own it outright when the last payment clears. Simpler than PCP with no end-of-term decision to make.
- Higher monthly than PCP on the same car, but total interest paid is often lower overall.
PCH (leasing)
Personal Contract Hire is pure rental: you never own the car, there's no balloon payment, and the monthly cost is often the lowest of all options.
- Fixed monthly cost includes road tax, sometimes servicing
- Strict mileage limits; exceeding them costs per mile at the end
- You hand back the car at the end, with no equity or ownership
Salary sacrifice for cars
If your employer offers a salary sacrifice car scheme, payments are deducted from your gross salary before tax and National Insurance, making it one of the most tax-efficient ways to get a car, especially for electric vehicles which attract just 3% Benefit in Kind tax (2025/26).
- Save income tax (20–45%) plus NI (8%) on the monthly lease cost
- Employer also saves NI, so some pass savings on via subsidised rates
- Only available through your employer. Not all companies offer it; check with HR
- Reduces pensionable pay, so consider the impact on pension contributions
The balloon payment trap
The GFV is the lender's estimate of the car's value at the end of the term. If the car's actual market value falls below the GFV (due to excess mileage, damage, or a falling market), you could be in negative equity. That means part-exchanging into a new deal might leave you with a shortfall to pay.
Monthly payment vs total cost
The lowest monthly payment is rarely the cheapest deal. PCP can look attractive because payments are lower, but the total amount payable (payments + balloon) often exceeds what you'd pay on HP for the same car. Always compare total payable, not just APR or monthly cost.
- APR is the best single comparator between two deals on the same product type
- A longer term lowers monthly payments but significantly increases total interest paid
- New car finance rates are typically lower than used, so factor this into comparisons
Mileage limits
- PCP and PCH agreements set an annual mileage cap at the start. Exceeding it costs between 3p and 15p per mile at the end of term.
- Set your mileage honestly, or slightly higher, than you think. Underestimating to get lower payments often costs more in penalties.
- On HP there are no mileage restrictions. It's your car, drive as far as you like.
You don't own it (yet)
- On both HP and PCP, the lender owns the car until the final payment. You can't legally sell it without settling the finance first.
- Voluntary termination (s99 CCA): once you've paid 50% of the total amount payable, you can return the car with no further liability. A legal right most people don't know they have.
Understanding APR
- APR (Annual Percentage Rate) is the yearly cost of borrowing including interest and mandatory fees. It's the most useful single number for comparing deals.
- Advertised APRs are representative: only 51% of applicants need to receive that rate. Your actual rate depends on your credit profile.
- New car finance typically offers lower APRs than used; manufacturer-backed deals can be 0% on selected models.
Credit score & eligibility
- A higher credit score typically unlocks lower APRs, potentially saving hundreds over the term
- Use a soft eligibility check before applying; a hard search leaves a mark on your credit file
- Check and tidy your credit report 3–6 months before applying
GAP insurance
If your car is written off, your insurer pays its current market value, which will be less than what you paid and potentially less than your outstanding finance balance. GAP (Guaranteed Asset Protection) insurance covers that shortfall.
- Particularly worth considering on PCP, where the balloon payment creates a larger gap risk
- Don't buy from the dealer on the day; standalone GAP policies are usually cheaper
Depreciation & negative equity
New cars typically lose 15–35% of their value in the first year. If you want to exit a finance agreement early, you may owe more than the car is worth. This is negative equity.
- PCP balloons are set to reduce this risk; the GFV is designed to roughly match market value at term end
- High-depreciation models (some electric vehicles, heavily optioned cars) carry more negative equity risk mid-term
Educational guidance only. Not financial advice. All figures are illustrative. Actual finance rates, terms, and eligibility are determined by lenders based on your individual credit profile and circumstances. Always read the full agreement before signing.
Know when PCP, HP or other finance fits best
The car finance guide explains the practical trade-offs between PCP, HP, leasing and personal loans before you sign anything.