Car finance explained

One of the most popular ways to purchase a new or used car is to buy it on finance. The Johnsons Cars team have decades of experience in providing vehicle finance and leasing in a trustworthy manner and can support you in finding a finance plan that makes sense.

The reason why car finance is so popular is that it allows you to split the purchase of your new or used car into easy to handle monthly payments. There are also several different finance options that can be personalised to you so you can find a package that suits your need.

Watch this video to find out more or read on.

What Types of Car Finance are there?

There are several types of car finance, including Personal Contract Purchase, Personal Contract Hire, Personal Loans and Hire Purchase. All of these offer their own unique benefits.

Conditional Sale (CS)

Possibly one of the simplest finance options to understand is a Hire Purchase, which is a great option if you want to own the car at the end of the finance agreement. You simply pay for your car in monthly instalments and during this period you are hiring the car. Once you have completed your last monthly payment*, then the ownership of the vehicle transfers to you.

More about Conditional Sale

Personal Contract Purchase (PCP)

A Personal Contract Purchase (PCP) is one of the most flexible finance options, giving you the option to own the car or hand it back at the end. At the start of the agreement, the finance company estimates how much the car will be worth at the end of the agreement and guarantees this value (so long as it remains in good condition). Your monthly payments then cover the difference between how much you buy the car for and the guaranteed future value. This means at the end of the agreement you have the option to: make a final payment*, often called the balloon payment, to take ownership of the vehicle; hand the vehicle back (charges may apply if the vehicle is not in a good condition or has exceeded excess mileage); part exchange it towards the purchase of your next vehicle.

A Personal Contract Purchase is often incorrectly referred to as a lease as it shares a lot of similarities however, it is a form of a loan and is generally more flexible than a lease.

More about Personal Contract Purchase

Personal Contract Hire (PCH)

A form of a car lease, Personal Contract Hire offers a simple solution to those looking for a new car and know that they will be looking to change car again after a set period of time. Very simply, you are renting the car for a chosen period of time with monthly payments. At the end of the PCH lease, the vehicle is returned and you are free to buy or lease another car. PCH is only available on new cars and there is not normally an option to buy at the end of the agreement.

More about Personal Contract Hire

What is the difference between Car Finance options?

Below is a table comparing each type of finance. These are generalisation so if you want to check that these apply to the car you’re interested in, please contact us.

Hire Purchase Personal Contract Purchase Personal Contract Hire

Available on New Cars




Available on Used Cars


Yes – Age limits may apply


Max Term

60 months

48 months

48 months

Maximum Deposit



Equivalent to 12 months’ payments

Minimum Deposit



Equivalent to 1 months’ payment

Options at the end of agreement

Once all monthly payment are made you own the vehicle*

Pay Final Payment and own vehicle*.

Refinance final payment to keep the vehicle.

Return Vehicle without paying final payment (charges apply if exceeded mileage limitation or vehicle is not in good condition)

Part Exchange Vehicle toward next purchase

Return the vehicle

Mileage Limitations


Up to 30,000 per year

Lower Mileage means lower monthly payment

Up to 30,000 per year

Lower Mileage means lower monthly payment

*In addition there is an option to purchase fee which is typically £10 but will be stated on your finance quotation.

​Car Finance Deals

If you’re looking for a used car, our used car finance calculator will allow you to build your own PCP or Hire Purchase Finance deal.

For New Car Finance, we list examples on our website so you can get an idea of how it works. Get in touch with us and we’ll build a bespoke offer for you around your desired vehicle, term, mileage and deposit.

Used CarsNew Car Offers

Got More Finance Related Questions?

Johnsons have decades of experience representing multiple car manufacturers and their car finance divisions including Toyota, Hyundai, Fiat, Honda, Volkswagen and Ford. We’re always happy to help customers with any finance related queries so please feel free to get in touch. Alternatively, check out our Finance FAQs.

Contact UsFinance FAQs