PCP, or Personal Contract Purchase, typically involves lower monthly payments followed by a larger optional final payment if you want to own the car outright. HP, or Hire Purchase, spreads the full cost of the vehicle evenly across the agreement, with ownership transferring to you automatically once the final payment is made. Both types of agreement can be affected by the motor finance redress scheme.
In more detail
How does PCP typically work?
With PCP, you pay a deposit and monthly payments based on the vehicle's expected depreciation over the agreement, rather than its full value. At the end, you can choose to make a final "balloon" payment to own the car, hand it back, or use any equity towards a new agreement.
How does HP typically work?
With HP, your payments are calculated to cover the full value of the vehicle plus interest, spread across the term. Once the final instalment is paid, ownership transfers to you automatically, there's no separate final payment required to own the car.
Does it matter which type I had for a redress claim?
Both PCP and HP agreements can be affected by the same underlying issue, discretionary commission arrangements that influenced your interest rate, if they were arranged between 2007 and 2024. The type of agreement doesn't determine eligibility, the commission structure behind it does.
Which is more common among affected agreements?
PCP agreements were more common overall during the relevant period and are more frequently referenced in redress discussions, but HP agreements are equally covered where the same commission issue applied.