Personal Contract Purchase (PCP) is the most popular method for financing a car purchase in the UK, accounting for approximately 80% of private new car finance agreements, but new research suggests there is widespread uncertainty about the benefits and how it differs from other finance solutions.
According to a new national survey commissioned by used car supermarket Big Motoring World, only 17% of car owners actually believe PCP to be the most cost-effective option available to them, while 35% say they don’t understand the difference between PCP and Hire Purchase (HP).
When asked which vehicle finance options would be the least costly, nearly one in 10 (9%) suggested a credit or debit card, despite that route typically incurring the highest APR interest repayments.
PCP is a flexible financing method that enables people to match a deposit with lower monthly payments over an extended period, helping spread the cost of a new or used car over three to four years.
When compared with HP finance, for example, monthly PCP repayments tend to be more affordable because the buyer is paying off the car’s depreciation, rather than the car itself. However, a majority (54%) currently consider a cash purchase the most cost-effective long-term financing option – despite the risk of unpredictable vehicle depreciation.
Older buyers prefer to pay with cash
The survey also revealed that, where practicable, outright cash purchase is the solution favoured by a majority of older drivers – two-thirds (66%) of 55-to-64-year-olds and 65% of car owners over the age of 64, compared to only 29% of those aged 18 to 24.
Big Motoring World’s survey data showed that less than half (42%) of UK car owners agreed with the statement that “a PCP agreement would provide me with some protection against potential financial loss if my vehicle depreciates in value”. Notably, when asked the same question, the majority (53%) of 18- to 24-year-olds responded with ‘not sure/don’t know what PCP is’, compared with only 21% of 35- to 44-year-old car owners. Conversely, 59% of 35-to-44-year-olds agreed with the statement.
Tailored finance
Nearly half (49%) of respondents in the survey agreed with the question “Would you be more or less likely to buy one car over another car on finance if the interest rate was tailored to your own individual circumstances / risk profile, instead of it being the same rate for everyone?”, a proportion that grows to 69% among 25-to-34-year-olds.
In 2025, Big Motoring World launched a new finance package, where the lending rate is more closely aligned with the personal circumstances of the customer, improving affordability and helping more people secure the vehicle that they really want. The used car supermarket has partnered with a range of leading car finance providers to offer more than half of its customers a standard 12.9% representative APR, while those with better credit scores are rewarded with borrowing rates as low as 10.9% APR, as well as reduced monthly payment plans.
Steve Archer, Group Financial Services Director at Big Motoring World, said: “It’s crucial that motor retailers create an easy pathway for customers to purchase the vehicle they really want. Through our network of leading car finance providers and thanks to our team of expert advisors, we can offer personalised PCP packages that meet the lifestyle and circumstances of our customers.”
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