" class="no-js "lang="en-US"> Just 13% Of Brits Understand PCP, According to New Zuto Study
Saturday, September 30, 2023

Just 13% Of Brits Understand PCP, According to New Study

In a recent survey carried out by car finance specialists Zuto which questioned 1,000 respondents’ knowledge of car finance terms, it was revealed that just 37% felt they understood car finance despite searches for car finance having increased 23% since this time last year.

Lucy Sherliker, Head of Customer at Zuto car finance says: “With rising interest rates and inflation costing us all more in day to day bills, getting your head around finances is arguably more important than ever – and knowing your options when it comes to borrowing money can help lessen the blow of big purchases on your finances by spreading the cost.”

To help Brits feel more confident in their knowledge, Zuto has simplified the car finance terms which commonly cause confusion.


16,200 searches for ‘what is PCP car finance’ over the last three months

According to the survey, just 13% understand PCP well despite it being one of the most popular types of car finance.

Lucy explains: “A Personal Contract Purchase (PCP) agreement is a type of car finance that lets you loan a new car for a fixed period of time before handing it back to the lender, or paying a balloon payment at the end to own the car outright. The monthly costs arranged ahead of your PCP contract will be based on the car’s predicted depreciation, plus interest, rather than the cost of the vehicle overall, so this would often work out as a cheaper option.


7,700 searches for ‘what is hire purchase’ over the last three months

The second type of car finance is HP – hire purchase – which enables you to keep the car at the end of the contract was understood by less than one in three respondents.

Lucy says: “Hire purchase (also referred to as HP) is a kind of car finance that allows you to purchase a car, paying pre-agreed, fixed monthly instalments which cover the cost of the car, plus interest – and then at the end of the term, the car belongs to you.”

Balloon payment

810 searches for ‘balloon payment car finance’ over the last three months

Balloon payments was the least well known term according to the survey, with just 9.7% respondents ticking that they understood well.

Lucy advises: “Specific to PCP car finance, a balloon payment is an optional lump sum that you can pay at the end of your finance agreement if you want to buy the car outright – the size of this balloon payment will be decided at the beginning of your agreement.”

Credit score

13,200 searches for ‘what is credit score’ over the last three months

Your credit score can impact many aspects of your personal finance options, car finance being one of them. Credit score was one of the more well understood terms in the study with 35% understanding well.

Lucy says: “Your credit score is an overall rating that helps lenders gauge your ability to borrow money from them and pay it back. They will want to know information such as whether you’re on the electoral roll and your debt and borrowing history – the number of hard credit searches done by lenders will also contribute to your score so consider this when you’re searching for your next finance product.

“The higher your score, the more favourable you look as a candidate for car finance – however if you have a bad credit score, some car finance lenders will still consider your application so it’s worth doing some research to find a company who offers bad credit car finance.”


2,640 searches for ‘what does deposit mean’ over the last three months

Deposit was the most understood term in the survey, with 38% of respondents saying they understood well, but how does it work with car finance?

Lucy explains: “A deposit is a sum of money that you pay at the start of a financial agreement – the larger your deposit, the lower your monthly payments. Some car finance brokers will offer ‘no deposit’ car finance which can be helpful for those with limited savings – this ultimately means you’ll be borrowing more money to pay for the car so you’ll also be paying more interest which is good to be aware of.

“One kind of deposit in the case of financing a car is a ‘part exchange’ whereby you trade in your old car for cash, which you can then put down as your new deposit.”


10,100 searches for ‘what is a broker’ over the last three months

When looking into car finance, you may come across the term ‘broker’ rather than lender. Lucy explains how the two differ.

 “A broker will arrange financial transactions on behalf of someone else – for example, a car finance broker works with a panel of lenders and car dealerships on behalf of a customer to find a finance deal that works for their individual circumstances.”


24,300 searches for ‘what is APR’ over the last three months

With the cost of living high, searches for APR are also on the rise. Less than one in four respondents felt confident about this term yet it is crucial to understand this when taking out a car finance loan.

Lucy advises: “APR stands for annual percentage rate and applies to any personal loans that you take out – it is essentially the cost of borrowing money including the interest rate and other fees. Expressed as a percentage, the lower the APR, the less you will pay over the course of the agreement in addition to the money you’ve borrowed.

“It is usually higher than the flat rate of interest because it considers other factors in the calculation such as acceptance fee, term, loan amount and credit score.”

People In This Post

Companies In This Post

  1. Swoop and Sage Unveil Global Partnership to Revolutionize Business Funding and Cost-Savings Solutions Read more
  2. Leatherback Launches in the UK, Enabling Easier Remittance and Cross-Border Payments for Migrants and Businesses Read more
  3. Apron Raises $15m to Free Up Small Businesses and Accountants From The Pain of Processing Invoices Read more
  4. Financial Service Leaders Believe Sector Is “Digitally Fit” but Anxieties Around AI Remain, Reveals New Research Read more
  5. Haven Life and Nolo Partner to Empower More Americans on Their Financial Journeys Read more