Car Finance in UK — HP, PCP, Lease and Voluntary Termination

01 HP vs PCP vs PCH — the difference

• HP (Hire Purchase): pay in instalments, car becomes yours on last payment. Regulated by CCA 1974. Voluntary termination applies.
• PCP (Personal Contract Purchase): monthly payments + balloon payment at end (or return car). Regulated by CCA 1974. Voluntary termination applies.
• PCH (Personal Contract Hire / lease): rental, never becomes yours. CCA 1974 does not apply. Voluntary termination does NOT work under s.99.

02 Voluntary termination — CCA 1974 s.99

Statutory right: under HP or PCP, once you've paid 50% of the total amount payable (including all interest), you can return the car and end the agreement with no further liability.

• Does not require lender's consent — it is your legal right
• Is not a default — does not damage credit file
• Car must be in reasonable condition (fair wear and tear)
• If you've paid less than 50%, you top up to 50% when terminating

03 FCA Motor Finance Redress Scheme (PS26/3, March 2026)

• Scope: motor finance agreements 6 April 2007 – 1 November 2024
• Estimated redress: £7.5bn
• Payouts: planned 2026-2027
• Current status: scheme under legal challenge (FCA statement 1 May 2026)
• What to do: keep old HP/PCP agreements; FCA will announce claims process

04 Eligibility by status

• ILR / SW / Family: 6+ months UK + UK driving licence
• Refugees: 6+ months + UK credit footprint
• Student: rarely; usually requires UK guarantor

Russian, Kazakh and Ukrainian driving licences must be exchanged within 12 months of UK residence. IDP gives 12 months grace. UK test required for most countries (Russia not on approved exchange list).