Question 1

How is HP car finance calculated?

Accepted Answer

HP uses a standard amortisation formula: Monthly = P × r(1+r)^n / ((1+r)^n − 1), where P = car price minus deposit, r = monthly interest rate (APR ÷ 1200), n = number of months. Unlike PCP, you finance the full purchase price (minus deposit) because there is no balloon payment at the end.

Question 2

Do I own the car at the end of HP?

Accepted Answer

Yes — this is the defining feature of HP. Once you make the final monthly payment, ownership of the car automatically transfers to you. There is no balloon payment to make, no option to exercise, and no return decision. This makes HP the simplest form of car finance for buyers who want to own the car outright.

Question 3

Is there a mileage limit on HP?

Accepted Answer

No — HP has no mileage restrictions. You can drive as many miles as you like without any excess mileage charges. This makes HP particularly suitable for high-mileage drivers such as delivery professionals, sales executives, and those with long commutes who would face significant excess charges on a PCP agreement.

Question 4

What is the half rule on HP?

Accepted Answer

Under Section 99 of the Consumer Credit Act 1974, once you have paid 50% of the Total Amount Payable on an HP agreement, you can voluntarily return the car and walk away with no further liability — provided the car is in reasonable condition. This is a significant consumer protection if your financial situation changes during the finance term.

Question 5

Can I settle HP finance early?

Accepted Answer

Yes — you can request a settlement figure from the lender at any time. Under the Consumer Credit Act, you are entitled to a statutory rebate of future interest charges. The settlement figure will be the outstanding principal plus any accrued interest to the settlement date, minus the rebate. Some lenders charge a small early settlement fee (typically one or two months' interest) — check your agreement.

Month	Payment	Interest	Principal	Remaining Balance
1	£455.66	£148.50	£307.16	£17,693
2	£455.66	£145.97	£309.70	£17,383
3	£455.66	£143.41	£312.25	£17,071
4	£455.66	£140.83	£314.83	£16,756
5	£455.66	£138.24	£317.43	£16,439
6	£455.66	£135.62	£320.04	£16,119
7	£455.66	£132.98	£322.68	£15,796
8	£455.66	£130.32	£325.35	£15,471
9	£455.66	£127.63	£328.03	£15,143
10	£455.66	£124.93	£330.74	£14,812
11	£455.66	£122.20	£333.47	£14,478
12	£455.66	£119.45	£336.22	£14,142

Feature	HP	PCP
Monthly payment	Higher	Lower
Own car at end?	Yes (automatic)	Optional (pay balloon)
Balloon payment?	No	Yes (GMFV)
Mileage limit?	No	Yes
Best for	Long-term ownership	Changing car every 3-4 yrs
Flexibility	Lower mid-term	Higher (return option)
Half-rule applies?	Yes (Section 99 CCA)	Yes (Section 99 CCA)

Credit Profile	Typical APR	Monthly (£15k, 48mo)
Excellent (750+)	5% – 9%	£347 – £374
Good (700–749)	9% – 14%	£374 – £413
Fair (650–699)	14% – 22%	£413 – £481
Poor (580–649)	22% – 38%	£481 – £596
Very Poor (<580)	38% – 55%+	£596+

Car Price	Deposit (10%)	Loan Amount	Monthly Payment	Total Interest
£10,000	£1,000	£9,000	£223/mo	£1,704
£15,000	£1,500	£13,500	£334/mo	£2,532
£20,000	£2,000	£18,000	£446/mo	£3,408
£25,000	£2,500	£22,500	£557/mo	£4,236
£35,000	£3,500	£31,500	£780/mo	£5,940

Term	Monthly Payment	Total Interest	Verdict
24 months	£818/mo	£1,632	Lowest interest, highest payment
36 months	£572/mo	£2,592	Good balance
48 months	£446/mo	£3,408	Most popular
60 months	£374/mo	£4,440	Lower payment, more interest

HP Car Finance Calculator UK 2026

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