PCP or HP, GMFV, and your voluntary termination point.
Choose PCP or HP, enter the price and deposit, and this calculator shows your monthly payment plus the exact point — in pounds and months — where you could legally hand the car back under Section 99 of the Consumer Credit Act.
Lower monthly payment, optional final payment to own
Guaranteed Minimum Future Value \u2014 a lump sum owed only if you choose to keep the car
Monthly Payment
£391
PCP \u00b7 48 months \u00b7 10.5% representative APR
Amount Financed
£21,600
Total Interest
£6,780
Total Amount Payable
£30,780
A £9,600 GMFV is due only if you choose to keep the car at the end of the term \u2014 it's not part of the monthly payment above.
Voluntary Termination (Section 99, CCA 1974)
You can hand the car back once you've paid £15,390 (50% of the total amount payable) \u2014 around month 34 of 48 on this plan.
Around nine in ten new cars in the UK are bought on finance, and the large majority of those are Personal Contract Purchase (PCP) rather than Hire Purchase (HP) — the two work quite differently. PCP finances the car's expected depreciation rather than its full price: you pay a deposit and monthly instalments, then choose at the end to pay an optional final payment (the Guaranteed Minimum Future Value, or GMFV) to own the car, hand it back, or trade it in. HP finances the full price in fixed instalments with no balloon, so you own the car outright once the last payment clears. PCP payments are typically 30-40% lower than HP for the same car and term, which is exactly why it dominates the market — but interest still applies to the full amount financed, including the deferred GMFV.
Whatever product you choose, lenders must advertise a “representative APR” — the rate that at least 51% of accepted customers actually receive, by law. Your own rate depends on credit profile and the finance company's own criteria. Typical 2025-26 rates run roughly 6-9% for strong credit and can reach the mid-to-high teens for weaker profiles. One advantage over some markets: the advertised price already includes VAT, so unlike a US-style sales tax, there's no separate tax line to add on top of what you finance.
If you financed a car before 2021, you may be owed money — though the picture is genuinely unsettled as this is written. Between 2007 and 2021, many dealers could adjust your interest rate under discretionary commission arrangements (DCAs), earning more commission the higher they set your rate, often without disclosing this clearly. Following a Supreme Court ruling, the FCA published final redress scheme rules on 30 March 2026, with an average payout estimated around £700-830 across roughly 14 million agreements. However, by May 2026 the FCA confirmed the scheme faces four separate legal challenges from finance companies and a consumer group, admitting there's a real scenario where the scheme is struck down entirely and complaints instead have to be raised individually. The regulator said clearer information wouldn't arrive until around November 2026. If you financed a car in this window, check the FCA's own motor finance pages directly for the current status rather than relying on any older summary, including this one.
The UK's other consumer protection is one very few buyers know they have until they need it: voluntary termination, a right written into Section 99 of the Consumer Credit Act 1974. Once you've paid at least 50% of the total amount payable under a regulated PCP or HP agreement — not 50% of the car's price, but 50% of everything you'd pay across the full term including interest, fees, and (for PCP) the GMFV — you can hand the car back and walk away, owing nothing further beyond charges for damage or excess mileage. Because the GMFV counts toward that 50% total on a PCP, the threshold is proportionally higher and takes longer to reach than on an equivalent HP agreement for the same car. It's a genuine legal right, not a loophole, though most dealers won't volunteer it.
51%
Share of accepted customers who must get the advertised representative APR
50%
Of total amount payable — your voluntary termination point (s.99 CCA 1974)
~£700–830
Estimated average motor finance redress payout, if the scheme survives legal challenge
There's no single named affordability rule in the UK the way the US has 20/4/10, but the guidance most UK money sites converge on is similar in spirit: keep the finance payment alone under about 10% of your net (take-home) monthly pay, and total vehicle costs — finance, insurance, fuel, MOT, and servicing combined — under 15-20% of it. On a net income of £2,000 a month, that puts the finance payment ceiling around £200 and total car costs around £300-400. Lenders run their own, more detailed affordability check under FCA rules before approving any agreement, weighing your income against your actual outgoings rather than a fixed percentage — but that check protects the lender's risk as much as your budget, so it's worth running your own numbers regardless of what you're approved for.
James takes home £2,400 a month net and wants a £24,000 car on a 4-year PCP. With good credit at 9% APR, a £2,400 deposit (10%), and a 40% GMFV (£9,600), his monthly payment comes out around £371 — about 15.4% of his net income, above the 10% finance-only guideline but the kind of gap that's common with PCP's lower headline payments. Choosing HP instead on the same car and rate, with no balloon, would push the payment to roughly £538 a month (22.4% of income), since the full price is financed rather than just the depreciation.
Used cars work a little differently: PCP is available but far less common on older vehicles, since the GMFV calculation depends on a depreciation curve that gets harder to predict as a car ages, so HP or a straightforward personal loan is the more usual route for used purchases. HP also carries no mileage limits or end-of-term condition inspection, which matters if you plan to keep a used car well past typical PCP terms.
The market runs through a handful of large finance houses rather than mainstream banks directly: Black Horse (part of Lloyds Banking Group) and MotoNovo Finance (FirstRand) are among the largest by volume, alongside Santander Consumer Finance, Close Brothers Motor Finance, and manufacturer-tied arms like Volkswagen Financial Services. Nearly all are arranged through the dealership rather than pre-approved independently, though several also offer standalone online applications worth comparing against whatever the dealer quotes.
PCP finances expected depreciation with an optional GMFV to own the car, giving payments typically 30-40% lower than HP. HP finances the full price with no balloon, so you own it outright at the end with no mileage limits.
Typical rates run roughly 6-9% for strong credit and can reach the mid-to-high teens for weaker profiles. Lenders must advertise a representative APR that at least 51% of accepted customers actually receive.
A right under Section 99 of the Consumer Credit Act 1974 letting you hand back a PCP or HP car once you've paid 50% of the total amount payable, including the GMFV on PCP. You owe nothing further beyond damage or excess mileage charges.
Possibly, if you financed between 2007 and 2021 under a discretionary commission arrangement. The FCA published redress rules in March 2026 (avg. payout ~£700-830), but the scheme faces legal challenges as of mid-2026 — check the FCA’s own pages for the latest status.
A common guideline: keep the finance payment under 10% of net take-home pay, and total vehicle costs (finance, insurance, fuel, MOT, servicing) under 15-20%. There's no single official rule, but lenders run their own affordability check too.
Yes — UK car prices already include VAT, unlike US-style sales tax which is often added separately, so what's advertised is what gets financed.
It's possible but far less common, since the GMFV depends on a depreciation curve that's harder to predict on an older vehicle. HP or a personal loan is the more usual route for used cars.
Reviewed by Evelyn John, Auto Sales Expert. Rates, GMFV conventions, and the motor finance redress scheme status checked against FCA statements and industry reporting current to September 2026 — this is a fast-moving legal situation, so confirm the latest position directly with the FCA before relying on it.