PCP vs HP Car Finance Claims: What’s the Difference
If you're looking to make a car finance claim, one of the first things you need to get to know is the type of agreement you had in place. There are two main types of agreements to look at:
While both are essentially forms of credit used to buy a car, they operate on entirely different principles and that can lead to different problems when mis-selling comes into play.
Getting to grips with how each works can be a real eye-opener and that's what helps you when mis-selling took place and what you can do about it.
What Is PCP Car Finance?
PCP stands for Personal Contract Purchase. The idea behind it is to keep monthly payments low. So, you pay an initial deposit, followed by regular monthly payments, and then at the end of the agreement you've got a choice: hand the car back, trade it in, or pay a final balloon payment to keep it.
Because of this set-up, PCP agreements can look pretty affordable on a month-to-month basis, even if the overall cost is actually higher.
What Is HP Car Finance?
Hire Purchase, or HP, is slightly more straightforward. You pay a deposit and then fixed monthly payments over an agreed period. When you've paid all those off, the car is yours to keep.
There's no massive final payment hanging over you, and the agreement's all about paying off the full value of the vehicle.
The Main Difference Between PCP and HP
At the end of the day, it's all about ownership and how the agreement is structured.
PCP gives you flexibility at the end of the agreement, but it includes a large optional final payment, and often there are mileage or condition terms to worry about. HP, on the other hand, is all about full ownership, no end-of-term decisions to make.
From a complaints point of view, PCP agreements tend to be slightly more complicated. And that complexity can lead to a whole host of problems, such as details not being fully explained.
Mis-Selling Issues That Are More Common in PCP Agreements
PCP agreements have raised some concerns that aren't as common in other agreements because of how they're set up. One thing that crops up a lot is how the final balloon payment is spelt out. If it wasn't made clear that you'd need to stump up a big payment to own the car, that can really affect your understanding of the agreement.
And then there are the mileage limits and condition clauses - these can lead to extra charges at the end if they weren't properly explained in the first place.
Another area to watch out for is affordability. The lower monthly payments might look more manageable, but if you weren't fully aware of the total cost or future obligations, that's got to be a concern.
And there are also issues around how the different end-of-term options were presented. If these choices weren't clearly explained, it may have affected how informed your decision was.
Mis-Selling Issues That Are More Common in HP Agreements
HP agreements are generally simpler, but still raise issues when it comes to mis-selling.
Affordability is still a big factor. If proper checks were not carried out or the agreement wasn't suitable for your financial situation, that may raise some red flags.
There can also be problems where the total cost of credit wasn't clearly explained and that includes the amount of interest you'd pay over the term.
In some cases, customers might not have understood that they didn't own the car until the final payment was made, which still needs to be clearly communicated.
Common Issues That Show Up In Both PCP and HP Agreements
While there are some differences, a lot of car finance complaints come down to issues that apply to both types of agreement.
One of the big ones is discretionary commission arrangements (DCA). The FCA's said that many motor finance agreements had some sort of commission involved, and it wasn't always clearly disclosed. That's a central issue in a lot of complaints at the moment.
Another area to watch out for is add-ons, things like GAP insurance, extended warranties and service plans. These often get included in both PCP and HP agreements. If they weren't properly explained or were pushed as necessary, that may be relevant.
Lack of transparency is also a common theme that includes unclear explanations of costs, unclear terms, or important information not being highlighted.
Pressure selling can also come into play; if you felt rushed or pushed into agreeing without enough time to get your head around the details, that may be a factor.
How Commission Links To Both Agreement Types
Commission's not limited to one type of finance, it can apply to both PCP and HP agreements that are arranged through dealerships or brokers.
In some cases, the amount of commission could be influenced by the interest rate or structure of the deal. If that wasn't explained properly, it may affect how fair and transparent the agreement was.
This is all under review by the FCA at the moment which is why some complaints are being handled under temporary rules as of March 2026.
Add-ons and extras in PCP and HP
Add-ons can pop up in both types of agreement and are often financed as part of the total amount borrowed.This means you might have paid interest on extras such as GAP insurance, paint protection or a warranty over the whole term of your agreement. Even if you're not looking into a PCP (Personal Contract Plan) or HP (Hire Purchase) issue, if these extras were not clearly explained or were slipped in without you giving clear consent then that's worth looking into.
The real issue here is not so much what kind of agreement you had but rather how all those add-ons were explained to you at the time and whether you actually had a choice.
Does The Type Of Agreement Affect Your Claim?
The type of agreement you had, whether it be PCP or HP could influence some of the details of your complaint, but in the end, it won't determine whether you have grounds for a complaint.
Both PCP and HP agreements are regulated by the FCA (Financial Conduct Authority) and are subject to giving clear information, treating customers fairly and making sure the deal is suitable for the customer.
What really matters here is the specific circumstances of your agreement. Was anything unclear, misleading or not suitable when you entered into the agreement?
What To Check in Your Own Agreement
When reviewing your car finance deal, it's a good idea to go back over how it was explained to you at the time. Think about whether you had a clear picture of the total cost, the main terms of the deal and any additional stuff that was added on. Consider whether you felt like you really had a choice, or whether certain things were just presented as part of the deal.
If you had a PCP agreement, check that the final payment and the terms for when you'd finished paying were all clearly explained. If you had HP, check that the full cost and how you'd be paying it back were all made clear.
In both cases, have a look at whether there were any commissions or add-ons mentioned and how they were described.
The Current FCA position
As of early 2026, complaints about motor finance commission in PCP and HP agreements are still affected by temporary rules introduced by the FCA (Financial Conduct Authority). These rules allow firms to pause responding to certain complaints while the FCA continues its review into historical commission practices, including discretionary commission arrangements (DCAs).
The pause on complaint handling is currently set to run until 31 May 2026, although this could change depending on the outcome of the FCA’s work.
Alongside this, the FCA has now confirmed it is actively developing a potential industry-wide redress scheme. This would apply to certain types of motor finance agreements where customers may have been affected by unfair or non-transparent commission arrangements.
If introduced, a redress scheme would mean:
- You may not need to complain individually in some cases
- Firms could be required to identify affected customers and calculate compensation
- The process would be more consistent across the industry
The FCA is expected to consult on how this scheme would work, including who qualifies, how redress is calculated and how payments would be made.
At this stage, no final rules have been confirmed. This means complaint outcomes, timescales and next steps can still vary depending on your individual situation and the type of agreement you had.
You can still raise a complaint directly with your finance provider. If you're not satisfied with the response, you can take your case to the Financial Ombudsman Service (FOS), free of charge.
Understanding The Difference Helps You Ask The Right Questions
So while PCP and HP agreements are different in how they work, they can still give rise to similar problems if things were not clearly explained when you entered into the agreement.
By understanding how your agreement worked and what you should be looking out for, you'll be in a much better position to decide whether to make a complaint and what points to raise. Check your agreement with Mis-Sold Expert and see if your agreement is eligible for compensation.
You can claim without using a claims management company; you can go to your finance provider and then to FOS, for free. Additionally, the FCA is introducing a free consumer redress scheme.
