PCP Finance Calculator: Monthly Payments, Balloon & Total Cost Explained

Personal Contract Purchase is how over 80% of new cars are financed in the UK — and a large chunk of used ones too. Use the free calculator below to see exactly what any car will cost you each month, what you'll owe at the end, and how much interest you're really paying.

What is PCP and why is it so popular?

Personal Contract Purchase (PCP) is a type of car finance where you pay a deposit, then fixed monthly payments for a set term, but you don't automatically own the car at the end. At the end of the agreement you have three choices: hand the car back, pay a large "balloon" payment to keep it, or use any equity as a deposit on your next car.

PCP dominates UK car finance because the monthly payments are lower than a personal loan or Hire Purchase for the same car. A £25,000 car over 4 years might be £322/month on PCP vs £480/month on HP — because on PCP you're only financing the depreciation, not the whole value of the car.

How is the monthly payment calculated?

Your monthly payment is determined by four numbers:

1. Car price (OTR) — the "on the road" price, including delivery, number plates and first year's road tax.
2. Deposit — the cash you put in upfront. More deposit = lower amount financed = lower monthly.
3. Balloon (GFV) — the Guaranteed Future Value set by the lender. This is what the car is predicted to be worth at the end of the contract. You finance the gap between today's price and the balloon, not the whole car. A higher balloon = lower monthly payment but more owed at the end.
4. APR — the annual interest rate. The lender charges interest on the amount financed each month.

The maths: the lender works out the present value of the balloon (discounted at your APR), subtracts your deposit, and spreads the rest over your monthly payments as an annuity. That's exactly what the calculator above does.

What is the balloon payment (GFV)?

The balloon — also called the Guaranteed Future Value or GFV — is the lump sum you either pay to own the car outright or hand back to avoid paying. The lender sets it based on their depreciation model for that exact car (make, model, mileage limit, term).

If at the end of your contract the car is worth more than the GFV, you have positive equity you can use as a deposit on your next deal. If it's worth less, you simply hand the car back — you're protected from the shortfall (as long as the car is in good condition and within mileage). This is why PCP is described as "flexible".

The GFV is typically set at 40–70% of the original OTR price, depending on the brand's residual values. Premium German brands (BMW, Mercedes, Audi) hold value better and therefore carry higher GFVs, which keeps monthly payments lower for the same car price.

APR explained — what's a good rate?

APR (Annual Percentage Rate) is the yearly cost of borrowing, including all fees. For PCP in the UK:

• 0–3% APR — manufacturer-subsidised deals on new cars. Rare, usually tied to specific models and requires a healthy deposit.
• 4–7% APR — competitive. Shop around or use a broker.
• 8–12% APR — typical dealer rate. Still workable but compare alternatives.
• 12%+ APR — high. At this level, seriously consider a personal loan from a bank instead, which is often cheaper for used cars.

Use the APR slider above to see exactly how much a higher rate costs you in total interest. On a £25,000 car over 4 years, the difference between 6% APR and 12% APR is roughly £2,500 in extra interest.

PCP vs HP vs personal loan: which is cheapest?

Hire Purchase (HP) is simpler: you pay a deposit and then equal monthly payments until you own the car outright. Monthly payments are higher than PCP for the same car, but there's no balloon at the end and no mileage limit to worry about. HP is better if you plan to keep the car long-term.

Personal loan means you own the car from day one and can sell it whenever you want. Interest rates from banks are often lower than dealer finance (especially for used cars), but you need a good credit score to get the best rates. There's no balloon, no mileage restriction, and no depreciation risk to you.

PCP wins on monthly payments and flexibility, but you pay more in total interest, you're tied to a mileage limit, and condition charges at handback can catch people out.

5 things to check before signing a PCP deal

1. Total amount payable — not the monthly payment. The contract must show the total you'll pay including all interest and fees. Compare this across lenders.
2. Mileage limit — PCP agreements have an annual mileage cap (usually 8,000–12,000 miles). Excess mileage charges run 6–15p per mile. Underestimating by 5,000 miles per year over 4 years could cost you £1,200–£3,000 at handback.
3. Condition requirements — "fair wear and tear" is defined by the BVRLA guide. Anything beyond this gets charged. Take photos before handing the car back.
4. Early termination — you can voluntarily terminate a PCP once you've paid 50% of the total amount payable (under the Consumer Credit Act). This is a useful exit if your circumstances change.
5. The APR on the actual agreement vs the advertised rate — representative APR is what 51% of applicants get. Your personal rate may be higher based on your credit profile.