Breakdown
How it works
Car finance is an amortising loan on the amount financed (price − deposit). With a PCP, a large final "balloon" payment is deferred to the end, which lowers monthly payments but increases total interest because the balloon accrues interest for the whole term.
Formula
Worked example
25,000 car, 5,000 deposit, 7.9% APR over 48 months with no balloon → 487 a month, interest 3,391. With a 10,000 balloon → 309 a month but interest 4,856.
Frequently asked questions
HP or PCP — which is cheaper?
HP costs less in total interest and you own the car at the end. PCP has lower monthly payments but you pay more interest and must pay the balloon, refinance it, or hand the car back.
What APR is typical for car finance?
Dealer finance on new cars: 0–7.9% (often subsidised); used cars: 8–15%; sub-prime 20%+. A bank personal loan is often cheaper than dealer HP for good credit.
Does a bigger deposit reduce interest?
Yes — interest is charged on the amount financed, so every unit of deposit saves interest for the full term. 10% is the usual minimum; 20% gets better rates.
What about UAE / GCC car loans?
Banks lend up to 80% of the car value (Central Bank rule) over a maximum of 60 months, usually quoted as a flat rate (e.g. 2.5% flat ≈ 4.7% reducing). Enter the reducing-balance rate here.