The headline maths
On a £15,000 used car kept for 4 years, with a 12-year-old buyer:
Cash: £15k now → £8.5k resale = £6.5k total cost.
HP at 8.9% over 48 months: £371/mo × 48 = £17,808. Resale £8.5k. Total cost £9,308.
PCP at 8.9% over 48 months with £5k balloon: £282/mo × 48 = £13,536. Either pay £5k balloon to keep + £8.5k resale = £10,036. Or hand back at zero cost = £13,536.
Cash beats HP by £2.8k. Cash beats PCP-kept by £3.5k. Cash beats PCP-handed-back by £7k.
But: if your £15k can earn 4.5% in a savings account (current best easy-access rate), that's ~£2,800 of interest over 4 years. Net advantage of cash drops to ~£0 vs HP and ~£700 vs PCP-kept.
When PCP makes sense
1. You don't actually have the cash — PCP buys you the car without the capital. The maths becomes irrelevant.
2. You want a newer car than your cash budget — £20k car on PCP feels like a £15k car cost. Some people value the upgrade.
3. You'll definitely hand the car back — if you treat PCP as a fixed-term lease, you've paid £13,500 to drive a £20k car for 4 years. That's £282/month for a Tiguan/3 Series-level car. Reasonable.
4. The manufacturer is offering subsidised APR — sub-5% deals exist on certain models. Run the maths.
When HP makes sense
1. You can't get a manufacturer deal and you don't want to commit to handing the car back.
2. You want to own the car outright at the end without the balloon decision.
3. Your savings rate is genuinely lower than the HP APR — if you're paying 8.9% APR on HP but your money would only earn 2% in a savings account, the APR is the dominant cost.
HP rarely beats both cash and PCP unless those two options are off the table.
When cash makes sense
1. You have the cash and your savings rate is below the finance APR. Most people, most of the time.
2. You want zero monthly commitment — if the car breaks down at month 18, you don't keep paying for something you can't use.
3. You're buying private — finance on a private purchase is harder and more expensive.
4. Your credit profile is poor — cash bypasses the APR penalty.
Use our PCP calculator to model your specific numbers.
The S&S ISA argument
Some UKPF commenters argue you should finance the car and put the £15k into an S&S ISA returning 7-10%. The maths only works if you're confident in those returns AND you'll genuinely keep the £15k invested for 4+ years.
For most people, the disciplined version of this argument is: cash for the car AND keep contributing to ISA from monthly income.
Don't let 'invest the difference' become 'spend the difference'.