A car finance monthly payment worked out from the amount financed, the APR and the term, with hire purchase and PCP compared on the same car.
A car finance monthly payment follows from four things: the amount financed after any deposit, the APR, the length of the agreement, and whether a balloon payment is deferred to the end. Hire purchase spreads the whole amount to zero over the term. PCP repays only part of it and defers the rest, which lowers the monthly figure without lowering the total.
Enter the amount financed, the APR and the length of the agreement.
Over 48 months you repay £18,081 on £15,000 borrowed. A longer term lowers the monthly payment and raises the total.
This is arithmetic on the figures you enter, not debt advice. It assumes the rate and the payment both stay the same and that nothing further is borrowed, which is rarely how a real balance behaves. For free, regulated help, talk to MoneyHelper or StepChange.
| Tax/source year | 2026/27 |
|---|---|
| Region | England/Wales/Northern Ireland |
| Tax code basis | 1257L where the page uses PAYE defaults |
| Pension basis | No pension deduction unless this example says otherwise |
| Student loan basis | No student loan unless selected in this example |
| What is not decided here | PayBreakdown does not decide payroll correctness, lender approval, benefit entitlement or employer compliance, and does not give regulated financial, mortgage, debt, tax, payroll or legal advice. |
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The figures on this page are worked from car finance, using the values below. Open the calculator if your example salary differs.
Both agreements charge interest the same way: the APR is converted to a monthly rate and applied to the balance still outstanding. What differs is the floor that the payments drive the balance down to. Hire purchase drives it to zero, so the last monthly payment ends the agreement. PCP drives it down to a guaranteed minimum future value instead, and that deferred sum stays inside the balance for every month of the term, so it carries interest throughout.
Cost of the credit here is total repaid minus amount borrowed, divided by amount borrowed. It is not the APR. The APR is an annual rate; this figure accumulates over the whole agreement, so the same APR over a longer term produces a larger percentage. A UK APR already contains compounding, so the monthly rate is its twelfth root, not a twelfth.
The calculator above already covers the hire purchase case for this page's default inputs, which are examples rather than published rates: £15,000 financed at 9.9% APR over 48 months is £377 a month, £18,081 repaid, and a cost of the credit of 20.54%. What it does not cover is a balloon, because the balloon is not one of its inputs. Put a £6,000 balloon against the same car at the same APR over the same term and the monthly payment becomes £273. Keeping the car at the end means the 48 monthly payments and then the £6,000, which is £19,123 in total and a cost of the credit of 27.49%. That is £1,042 more than hire purchase, for a monthly payment a little over £100 lower. Every figure in this section is rounded to the pound, so multiplying a monthly payment by the term will not reproduce a total exactly.
Voluntary termination is a right in the Consumer Credit Act 1974. Section 99 lets the debtor under a regulated hire purchase or conditional sale agreement end it at any time before the final payment falls due. Section 100 sets what is owed on ending it: enough to bring the sums paid up to one half of the total price, and nothing further once that half is reached. The half is a limit on what ending early can cost, not a condition on the right to end early. Section 189(1) defines total price to include any sum payable on exercising an option to purchase, which is why a deferred final payment sits inside that half rather than outside it. Whether an agreement is a hire purchase or conditional sale agreement is stated on the agreement itself.
The APR on a real agreement is set by the lender once it has assessed the application. The FCA's rules on that assessment sit in CONC 5.2A of its Handbook, which requires a creditworthiness assessment before a regulated credit agreement is entered into and treats affordability as part of it. That assessment draws on income, existing commitments and credit reference data that this page has no sight of. Nothing here decides whether an agreement will be offered, or at what rate. The Bank of England publishes effective interest rates on new consumer credit borrowing each month, which is where market rates are recorded.
This estimate is worked out on £35,000 annual gross. Interest rate, term, fees, deposit and the credit commitments you already have all move the result, and a lender applies its own affordability policy and credit checks on top. Treat the number as a way to see whether a repayment looks comfortable or stretched, not as an offer — and read it against your real bills, savings and any income change you expect. See how each deduction is worked out.
No. It changes when the money is paid, not how much of it there is. The monthly payment falls because less of the capital is cleared each month, and what is left arrives as a single sum at the end. Across the whole agreement the total goes up rather than down.
The cash price less any deposit, part exchange and dealer contribution, plus any fee the agreement adds to the balance rather than charging separately. That is the sum interest is calculated on, and a quotation usually shows it as the amount of credit. Entering the full cash price when a deposit has already been paid overstates the payment.
This page applies one APR to one balance over a whole number of equal monthly payments, with no fees. Real agreements commonly add a document fee at the start and an option to purchase fee at the end, and the first payment date can shift the interest slightly. The result is an estimate for comparing structures, not a quotation.
Last updated 2026-08-27. Checked by Sean Elsmore. Rates last checked against GOV.UK on 2026-08-07. Estimates are for planning and should be checked against official records where the decision matters.