Both PCP (Personal Contract Purchase) and HP (Hire Purchase) are regulated by the Financial Conduct Authority (FCA) and covered by the Consumer Credit Act 1974. Key protections include a 14-day cooling-off period, the right to voluntary termination once you have paid 50% of the total amount payable, and — for agreements over £100 and up to £30,000 — Section 75 joint liability with the lender. You do not own the car during either agreement: with HP you own it after the final payment; with PCP you choose to pay a balloon 'optional final payment', hand it back, or part-exchange.
PCP vs HP key protections
| Right / rule | PCP | HP |
|---|---|---|
| Cooling-off period | 14 days | 14 days |
| Voluntary termination at 50% | Yes | Yes |
| Own the car during term | No | No |
| End options | Pay balloon, return, or part-exchange | Own after final payment |
| FCA regulated | Yes | Yes |
Who regulates UK car finance
Car finance sold by dealers, brokers and lenders is a regulated credit activity overseen by the FCA, underpinned by the Consumer Credit Act 1974. Firms must be authorised, treat customers fairly, and present costs clearly. The FCA's Consumer Duty also requires lenders to deliver fair value and avoid foreseeable harm.
How PCP and HP differ
With Hire Purchase you pay a deposit then fixed monthly payments, and you own the car automatically after the last payment (plus a small option-to-purchase fee). With PCP, monthly payments are lower because you defer a large 'optional final payment' (balloon) based on the car's predicted value; at the end you pay it to keep the car, hand the car back, or use any equity toward a new deal.
Your core FCA/CCA rights
- 14-day cooling-off: you can withdraw from the credit agreement within 14 days of signing and repay any amount drawn.
- Voluntary termination (VT): once you have paid 50% of the total amount payable (including the balloon and fees on PCP), you can end the agreement and return the car, subject to fair wear and tear.
- Section 75 protection: for the car itself (cash price over £100 and up to £30,000), the lender is jointly liable with the dealer if something goes seriously wrong.
- Early settlement: you can settle early and are entitled to a statutory rebate on interest.
Voluntary termination in practice
VT is a powerful right if your circumstances change, but three points matter: you must have paid (or bring payments up to) 50% of the total amount payable; the car must be in reasonable condition for its age and mileage or you may be charged for damage; and on PCP the 50% figure includes the large balloon, so the halfway point often arrives later than people expect.
If something goes wrong
Raise a complaint with the lender first. If it is not resolved within eight weeks, you can escalate free of charge to the Financial Ombudsman Service. Keep the agreement, the pre-contract information and any correspondence.
Frequently asked questions
Can I hand my car back on PCP or HP?
Is car finance covered by Section 75?
Do I get a cooling-off period on car finance?
What happens if I miss PCP or HP payments?
Sources & further reading
Figures, prices and policy details were current at the last-updated date above. Automotive pricing, incentives and regulations change frequently — verify time-sensitive details with the linked primary sources. Read our editorial policy and fact-checking standards.
