HP vs Buying Outright Calculator
Considering HP finance but wondering if you should just pay cash? This calculator shows the interest premium you pay for the convenience of spreading the cost over monthly instalments.
Frequently asked questions
Is it always better to buy a car outright?
Not necessarily. Buying outright avoids interest but ties up a large sum of cash. If you can earn a higher return investing that cash than the interest rate on the HP deal, financing could be the better financial decision. You also lose the flexibility of keeping savings available for emergencies.
How much more does HP cost than paying cash?
The difference is the total interest paid over the term. For example, a £20,000 loan at 8.9% APR over 48 months costs roughly £3,900 in interest. The higher the APR and the longer the term, the more you pay in total.
Can I negotiate the price differently if paying cash?
Dealers sometimes prefer finance customers because they earn a commission from the lender. Paying cash does not always guarantee the best deal. Always compare the on-the-road price regardless of payment method.
Should I use savings or take HP finance?
Compare the HP APR with the interest rate on your savings. If your savings earn 5% but the HP costs 8.9%, paying cash saves you money. If the HP rate is 0% (sometimes offered by manufacturers), financing is effectively free and keeping your cash invested makes sense.
These calculations are estimates based on 2026/27 HMRC and DVLA rates. Speak to a lender or qualified financial adviser for a personalised quote.