PCP Reality Check
Finance Analysis: January 2026
PCP Reality Check
Reveal the true cost. Don't let the monthly payment hide the interest.
Financial Disclaimer: This PCP Reality Check tool is for illustrative purposes only and does not constitute financial advice, a formal valuation, or an offer of credit.
The "True Monthly Cost" is a representative calculation that spreads your initial deposit over the term of the agreement to show total expenditure; it does not reflect your actual monthly bank outgoings. Calculations for interest and total cost are based on the figures you provide and assume the vehicle is returned at the end of the term in accordance with the contract's "Good Condition" and mileage requirements.
ChangeCar.com is not a financial advisor or a credit broker. Car finance is a legally binding commitment. You must check your formal credit agreement and Consult with an independent financial advisor or the Citizens Advice Bureau before signing any finance contract. ChangeCar accepts no liability for financial decisions or losses resulting from the use of this tool.
The PCP Trap: Why the Monthly Payment Lies
Personal Contract Purchase (PCP) is the most popular way to finance a car in the UK, but it is also the most misunderstood. Because the payments are lower than a traditional loan, it’s easy to feel like you’re getting a bargain. In reality, you are often paying significant interest for the luxury of not owning the car.
The "Deposit Illusion"
When a dealer asks for a £3,000 deposit, they aren't just taking your cash; they are lowering the "sticker price" of your monthly payment. Our calculator adds that deposit back into the mix to show you your True Monthly Cost. If you put down £3,000 on a 3-year deal, you are effectively paying an extra £83 every single month that doesn't show up on your direct debit.
The Balloon Payment Interest
The Hidden Cost
On a PCP, you pay interest on the entire value of the car, including the final balloon payment, for the whole term. Even though you aren't paying off the balloon yet, you are still being charged interest on it every month.
Equity Risk
If car values drop (as we've seen recently in the UK EV market), you may reach the end of your deal with "Zero Equity," meaning you have no deposit for your next car.
Is PCP ever a good idea?
PCP can be useful if you enjoy driving a new car every three years and want the security of a Guaranteed Minimum Future Value (GMFV). It protects you if the used car market crashes. However, if your goal is to eventually own the vehicle, a standard Hire Purchase (HP) or a bank loan will almost always be thousands of pounds cheaper in the long run.
ChangeCar Insider Tip
Always ask the dealer for the "Total Amount Payable." Compare this to the cash price of the car. The difference is the "Finance Rent"—the pure profit the lender is making from you. If that number makes you wince, it's time to look at a cheaper car or a different finance product.