Buying a car on finance – the different options from hire purchase to a car loan
We spend so much time commuting in our cars that the style, comfort and “spec” of a new car is easily appreciated. If you find yourself thinking of getting a new or used car, there are many different types of car finance available to you if you do not have the funds immediately ready. These options can include hire purchase, PCP, and a car loan.
In this blog we will explore all aspects of buying a car on finance and how they differ to help you make an informed decision.
What is a Hire Purchase Agreement
A hire purchase (HP) agreement is offered by many garages particularly when buying a brand-new car. With this method of finance, you essentially hire the car from a finance company and retain the option to buy at the end of a term at an agreed value. You will typically be asked to also put down an initial deposit based on the car’s value which is usually at least 10%. As part of the contract, you will be required to meet your monthly payments as agreed in the contract over a period of time.
Once the contract ends, you will have the option to purchase the vehicle. It is important to know that with a Hire Purchase agreement, you never own the vehicle for the duration of the contract. The vehicle only becomes yours if you make a significant final payment (often called the balloon payment) at the end of the term to purchase the car.
What is PCP Finance
PCP stands for Personal Contract Purchase and is a type of Hire Purchase Agreement. It usually has lower monthly repayments compared to Hire Purchase Agreements or car loans. You will still pay a deposit of usually at least 10% but will need to pay a balloon payment at the end of the term if you wish to own the vehicle.
This type of finance is generally considered the least flexible form of car finance. This is because the monthly payments are fixed for the duration of the contract, and you cannot sell the vehicle if your financial circumstances change. There may be other complexities with the contract as well such as mileage limits and servicing.
How a Car Loan differs to Hire Purchase and PCP Finance
Another car finance option is a car loan. A car loan usually involves borrowing money from a bank or financial institution. Car loans differ from hire purchase in many ways. With a car loan you own the car from the start and make regular repayments to service the loan. Unlike hire purchase, you can sell the car at any time and pay off the loan. Ownership of the vehicle also makes you unconstrained when it comes to aspects such as where to service it or following mileage limits etc.
A car loan differs from PCP finance in a similar fashion, with car ownership from the start the key difference. As you own the car from the outset, you will also take on the full risk of depreciation with a car loan. You will need to make regular loan repayments which will include interest on the loan. The repayments may be higher than Hire Purchase or PCP payments on a monthly basis but there is no balloon payment at the end of the loan term.
See the Avant Money guide to car loans for additional information.
Making the right choice for you
When deciding between buying a car on finance through a Hire Purchase Agreement, PCP Finance, or a car loan, it's important to weigh up the different advantages and disadvantages of each and decide what is right for you.
If you prefer the flexibility and ownership of a car loan, then an Avant Money car loan may be an option for you. The loan term is flexible depending on your needs with terms of between 12 to 84 months offered. You can borrow from 5k to 75k with an Avant Money car loan. Avant Money currently offer Ireland’s best fixed rate on loans over €20k at an APR of 6.8%*. As it’s a fixed rate car loan, your monthly repayment will stay the same for the duration of the loan but there are no early repayment fees.
You can visit the CCPC website to find out more on buying a car under a Hire Purchase Agreement or PCP finance.
* Rates and loan terms are correct as of 1st April 2025 and are subject to change (Source: CCPC.ie). Maximum APR (Annual Percentage Rate) is 19.9%. Minimum loan term is 12 months and maximum term is 84 months.
Lending criteria, terms and conditions will apply. Personal loans are available to residents of the Republic of Ireland over the age of 18 and are subject to repayment capacity and financial status. Proof of income and a credit reference agency search will be required to help us approve your request. Personal loans are unsecured and not available for business purposes, house purchase or investment.
Our interest rates vary depending on the value of your loan and credit profile. We will assign you the appropriate interest rate once your application has been reviewed. To find out more about the loan values and applicable interest rates, check out our rate table at https://www.avantmoney.ie/personal-loans.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit, a hire-purchase agreement, a consumer-hire agreement or a BNPL agreement in the future.
Representative example:
On a €20,000 loan over 5 years, at a fixed rate of 6.6% (6.8% APR) you will pay €392.26 a month. The total cost of credit would be €3,535.63 and the total amount repayable would be €23,535.63. Rate offered takes into account financial profile and credit history.
The above content of this blog does not constitute financial or professional advice or recommendations from Avant Money. Readers should always seek independent professional advice and not solely rely on the information within the contents of this blog.
For more information please visit Avant Money car loans.
Bankinter S.A., trading as Avant Money, is authorised by the Banco de España in Spain and is regulated by the Central Bank of Ireland for conduct of business rules.
