This is an estimate for general information. Finance offers vary and depend on your credit history. Check the APR, fees, total amount payable and the terms of any PCP in the credit agreement before you sign. This is not financial advice. Terms of use.
How the repayments are worked out
The amount financed is the car price less the deposit and trade-in. Each option is repaid in equal monthly payments at the APR, compounded monthly. HP and the loan clear the whole amount. A PCP clears only the part above the final payment (GMFV), so the monthly payment is lower, but interest runs on the final payment for the whole term. The total cost of credit is the interest plus fees. The total payable adds the deposit and, for a PCP you keep, the final payment.
Example. A €30,000 car with a €6,000 deposit over 36 months at 6.9% APR, with €150 of fees on each. The PCP has a €12,000 GMFV and costs €435.74 a month. Paying the €12,000 to keep the car brings the total payable to €33,837, with €3,837 in interest and fees. HP costs €737.66 a month, €32,706 in total and €2,706 in interest and fees. If the PCP car is handed back, with a €75 documentation fee only, the total paid is €21,762 for 36 months' use of the car.
What to check in a car finance quote
- The APR and the total amount payable, which must be shown in the credit agreement.
- On a PCP: the GMFV, the mileage limit, the excess mileage charge per km and the wear and tear rules.
- Documentation, completion and purchase fees.
- Whether a 0% or low APR offer means a higher car price than paying cash.
The CCPC (Competition and Consumer Protection Commission) describes PCPs as one of the most complex forms of car finance and has guides to PCP, hire purchase and the half rule.
Questions
What is the difference between PCP and HP?
Both are hire purchase agreements: the finance company owns the car until the last payment. With HP the monthly payments clear the full amount, so the car is yours after the final payment and any completion fee. With a PCP a large final payment, the guaranteed minimum future value (GMFV) or balloon, is left to the end. You pay it to keep the car, hand the car back, or use any equity as a deposit on another PCP.
Why are PCP repayments lower?
Because the balloon is not paid off during the agreement. You pay interest on it the whole time, though, so at the same APR a PCP costs more interest than HP. In the example on this page the PCP costs €3,687 in interest against €2,556 for HP.
What is the GMFV?
The guaranteed minimum future value is what the finance company says the car will be worth at the end of the agreement, if it is within the mileage limit and in good condition. It is set at the start and is the balloon you pay to keep the car. It often works out at 30% to 50% of the price after three years. If the car is worth more than the GMFV at the end, the difference is your equity.
What happens if I go over the mileage limit on a PCP?
If you hand the car back or trade it in, you pay an excess mileage charge for each km over the limit, set in your agreement. At 10 cent per km, driving 3,000 km a year over a 20,000 km limit for 3 years costs €900. If you pay the balloon and keep the car, no mileage charge applies.
Can I hand back a car on HP or PCP early?
Yes. Under the Consumer Credit Act 1995 you can end a hire purchase or PCP agreement early and return the car once you have paid half of the total amount payable (the "half rule"). If you have paid less, you pay up to the halfway point. Charges for damage can still apply. The CCPC explains how the half rule works.
Is a personal loan different?
With a loan from a bank or credit union you buy the car outright, so it is yours from the start and there are no mileage limits. The loan is not tied to the car. Loan APRs vary with the lender, the amount and the term, and some credit unions charge less than the advertised rates on car finance.
What fees are charged on car finance?
The CCPC lists common hire purchase fees: a documentation fee for setting up the agreement, usually €50 to €150, and a completion fee to end the agreement and transfer ownership, usually €50 to €75. A PCP usually has a purchase fee (option to purchase fee) if you keep the car. Check the fees in your agreement and enter them here.
What does APR mean?
The annual percentage rate is the yearly cost of credit, including interest and some charges, worked out the same way by every lender so that offers can be compared. This calculator treats the APR as the yearly rate of interest, compounded monthly. A quote with a 0% or low APR may come with a higher car price or fewer discounts, so compare the total payable as well.
