When looking at hire purchase relative to PCP or PCH:

1. You will be committed to a much higher monthly payment
2. As you pay interest on the whole value of the car, hire purchase is not a good choice if you only plan to  keep the car for 2-3 years;Hire purchase is not a flexible option if you change your mind because there will be a sizeable termination fee.
3. The VAT for the whole value of the car would normally be paid with the first instalment, but with PCP or PCH:

• your VAT bill is spread across each month of your agreement;
• you only pay VAT on the portion of the car that you use (e.g. if the car costs £10,000 and you decide to take a 3 year contract with PCP or PCH and that amounts to £6,000 across the 3 years then you only pay VAT on the £6,000 and save £800);

When looking at hire purchase relative to a personal loan, the main disadvantage is that you are not the owner of the car from the outset.

Personal Contract Hire (PCH) is a personal car leasing product. You pay an upfront fee (usually 3 months depending on your credit rating) and then a monthly car lease fee to obtain a new car for a period of typically between two to four years but you do not have the option to buy the CLICK TO READ MORE >>>

Personal Contract Purchase (PCP) is similar to PCH in that in order to obtain a new car you pay a specified deposit, commit to a monthly payment over a period which is typically 2 to 4 years, and agree an annual mileage.  Legal ownership is retained by the finance company.  However, the difference between PCP CLICK TO READ MORE >>>

A personal loan is an unsecured loan which a customer takes out to spend on whatever they choose.  It can be used for anything from buying a car to going on holiday.  It usually has a fixed cost and a fixed period. If a personal loan is used to buy a car, then the loan CLICK TO READ MORE >>>