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Key Differences between HP and PCP when buying a car

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When purchasing a vehicle, either through HP or PCP, some factors should be considered. In a Personal Contract Purchase agreement, you have to pay a deposit when signing up. Although many finance companies will only ask for a small minimum amount, the initial deposit can be as much as 15% of the car’s price. You then make monthly repayments on top of the deposit until the final payment, which is usually around 60% of the car’s value.

At the end of the agreement, you have to pay off any outstanding finance. However, if you want to buy the car, you will need to pay this off at that point.

An HP agreement has three separate payments; the initial deposit, monthly payment, and final payment. With an HP agreement, you can return your car at any time with no extra costs involved. However, you won’t be able to purchase the vehicle afterwards as you haven’t paid off the total value.

A significant difference between buying a car through HP and PCP is that you can still purchase the vehicle at the end of your agreement, but with PCP, you will need to pay off any outstanding finance.

When you come to sell your car – through either an HP or PCP agreement, some factors could affect how much it is worth. For example, suppose the vehicle has depreciated rapidly in this given time. In that case, there is a chance that you will be able to get back more of your initial deposit – significantly if the car’s price has dropped rapidly.

For more clarity, let’s take a look at the infographic below:


Infographic Created By Crossways Garage

Photo by Ildar Garifullin on Unsplash

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