What a car really costs: cash vs finance
Updated
Every route into a car costs money; they differ in how much and when. Paying cash avoids interest but ties up capital that could be repaying debt or earning elsewhere. This calculator runs each route forward over your holding period and compares what you end up with: cash left plus the car's resale value.
Applied to the REMAINING value each year, not the original price, because that is how cars actually depreciate: most of the loss is in the first two years. 18% is a typical UK average; a fast-depreciating car is 22 to 25 and a car that holds its value is 10 to 14.
Leave at 0 to use the rate above. Enter a figure and the curve is re-fitted to land on it, so the rate shown becomes the one your own number implies. Use what a trader would PAY you, not a forecourt asking price.
Out of income. Every option below is given the same budget, and whatever an option does not use is saved.
Insurance, tax, servicing, tyres, fuel. The same for every route, so it does not change which is cheapest.
The Guaranteed Future Value. On a PCP you may hand the car back instead of paying it.
A savings rate if the money would simply sit there. If you are carrying expensive debt, use the blend instead: the debt's rate on the share of your cash that debt could actually repay, and a savings rate on the rest. This field moves the answer more than the APR does.
Money remaining plus the car's resale value
No car at the end, so no resale
The baseline every route is measured against
Diminishing balance, or your own figure if you set one
The rate your resale figure implies, if you overrode it
The largest cost on every route, and the one with no monthly payment attached
Depreciation plus running costs plus what your money could have earned, divided by the months. The figure no statement shows you.
Everything above plus interest. Compare it with the monthly payment below.
What leaves your account. Always less than what the car costs.
Higher than PCP for the same car, because you are repaying the whole price rather than servicing part of it.
Derived from the same price, rate and term: the depreciation you are renting plus a charge on the average capital employed.
Against having no car at all
What choosing well is worth
Zero when the car is worth more than the final payment, which means handing it back would give away equity
Indicative estimate for limited-company business finance, not a quote or a credit decision. Rates you enter are your own; no credit search is run. Reviewed 15 September 2026.
What the car has cost you, month by month
Everything: depreciation, interest, running costs and what your money would have done elsewhere. Zero is having no car at all. Where two lines cross, the cheaper route changes.
- Pay cash
- PCP
- Hire purchase
- Lease
Interest paid, accumulating
Paying cash has none, which is the whole argument for it. Compare the scale against the chart above before treating it as the deciding number.
- Pay cash
- PCP
- Hire purchase
- Lease
Each payment: interest vs principal
- Interest
- Principal
Where the money goes if you pay cash
- Depreciation£11,21648%
- Running costs£9,00038%
- Your capital, tied up£3,37514%
Worked example
For £25,000 car ownership at 18.0%, the pay cash: left with is £29,093. No car, money invested: £53,442. Worth when you sell: £13,784. That is a yearly loss of: 18.0%.
How it works
- Each route is run forward month by month from the cash you have, not compared on its monthly payment. A deposit today and a payment in three years are not the same money, and only the timing tells you which is dearer.
- The car's resale value is added at the end, and anything still owed on finance is taken off it first. A lease adds nothing, because you never owned the car.
- Every route gets the same monthly budget out of income. Whatever a route does not spend is saved and earns, so a cheap monthly payment is credited properly instead of being thrown away.
- Your cash is valued at what it would otherwise do, through the last field. Leave it at a savings rate if that is where the money would sit. If you are carrying expensive debt, the better comparison is the rate on that debt, blended down by the share of your cash the debt could actually absorb, because repaying at 25 per cent beats saving at 4.5 per cent by six times. That single field moves the answer more than the APR does.
- Nothing is ranked or recommended. The cheapest row takes no view on whether you can survive the deposit, whether a mileage cap suits you, or what owning the car is worth to you.
Why the monthly payment is the wrong comparison
Almost every car calculator answers one question: what is the monthly payment. It is the easiest number to produce and the least useful one to compare, because a monthly payment says nothing about what you gave up to get it. Paying cash has a monthly payment of zero and is frequently the most expensive route available. A lease has the lowest monthly payment of anything and leaves you with no car. The only comparison that works is to run each route forward from the same starting point and look at what you are left with at the end: money plus car. That is what this page does. It is the same arithmetic a finance team would use, which is discounting cash flows, expressed the way a person actually experiences it.
The opportunity cost of capital, and why 4.5 per cent is usually the wrong number
Paying cash carries no interest, which is why it looks free. It is not. The money is in the car, and what decides this page is what that money would otherwise have been doing. The usual answer is a savings account at about 4.5 per cent. That is the right shape and often the wrong size, because the alternative use of a pound is your best alternative, not your most obvious one. If you are carrying a card at 25 per cent, a pound not spent on the car repays that card and earns 25 per cent, tax free and certain. That is roughly six times the savings rate, and it changes the answer rather than nudging it.
This page asks for that as a single figure, so it is worth working out before you type it. You can only earn a debt-avoidance rate on money that has debt to avoid. With 30,000 of cash and 10,000 on cards at 25 per cent, a third of your money is worth 25 per cent and the rest is worth a savings rate, so the honest entry is the blend of the two, near 11 per cent, and not the headline 25. Entering 25 against the whole 30,000 would credit you with earnings you could never have made and flatter every financed route on the page. If you would rather not do that arithmetic against your own balances, CoreFi does it from the accounts you connect: it takes what you actually hold and what you actually owe, and blends them.
Depreciation is the largest cost, and the one nobody sees
Interest is visible: it appears on a statement every month and people argue about it. Depreciation is invisible until the day you sell, and on most cars it is several times larger. A car bought at 25,000 and sold at 13,000 three years later has cost 12,000 in depreciation, against perhaps 3,000 of interest on a typical finance deal. The finance is a rounding error next to the asset. This is also why the depreciation rate above matters more than the APR, and why a resale figure, if you enter one, must be a price somebody would actually pay you rather than a forecourt listing. If you only change one input on this page, change the depreciation rate, or put a real trade-in quote into the override underneath it.
What a PCP actually is
A PCP is a loan on the difference between the car's price and a guaranteed value at the end, plus interest on the whole amount, plus an option. The option is the part that is rarely explained: at the end you may hand the car back and walk away, whatever it is worth. That is genuinely valuable if the car falls below the guaranteed figure, because the finance company absorbs the difference. It is worth nothing at all if the car is worth more, and in that case handing it back throws away the equity you have built. Neither outcome is a surprise if you check, which is why the figure is on this page. The other thing a PCP carries is a mileage cap with a per-mile charge beyond it, and that charge is settled at the end on the whole overage, not year by year.
The four routes, at a glance
| Route | Cash needed up front | Own it at the end | Who carries depreciation | Watch for |
|---|---|---|---|---|
| Cash | The whole price | Yes | You | The capital is locked in the car and doing nothing else |
| PCP | A deposit, often 10 per cent | Only if you pay the final payment | The lender, if you hand it back | Mileage caps, and a large final payment |
| Hire purchase | A deposit | Yes, after the last payment | You | Higher monthly payments than PCP for the same car |
| Lease or PCH | Usually three to nine payments | No | The lender | You have nothing at the end, and mileage caps apply |
There is no universally cheapest route. Which one wins depends almost entirely on what your cash would otherwise be doing and on what the car is worth when you sell.
Want this tracked against your real numbers?
This page works on the figures you type. CoreFi can work on the ones your bank actually reports: what the car is really costing you per month, what your capital is worth elsewhere, and what changes when a quote does. No quotes, no lenders, no obligation.
Track your own numbersFrequently asked questions
Is paying cash always cheapest?
No, and this is the finding most calculators miss. Cash avoids interest, which makes it look cheapest on the sticker. But it hands over the whole price on day one, and that money then stops doing anything else. If you are carrying a card at 25 per cent, a pound in the car is a pound not repaying that card. Raise the last field from a savings rate to the blended rate your own cash and debt imply, and the ranking often changes completely. The faster your money could have worked elsewhere, the worse paying cash looks.
Do I have to work out what it will be worth?
No. The page projects it from a depreciation rate on a diminishing balance, which is the shape cars actually follow: the rate applies to what is left each year, so most of the loss lands early. 18 per cent a year is a typical UK average, 22 to 25 is a fast depreciator and 10 to 14 is a car that holds its value. If you already have a real trade-in quote, put it in the override below the rate and the curve is re-fitted to land on it, so the rate shown becomes the one your own figure implies. Use what a trader would pay you rather than a forecourt asking price: the gap is typically 10 to 15 per cent and it is a real cost you meet on the way out.
Why does the lease column show no car at the end?
Because you hand it back. That is not automatically a disadvantage: you also never carried the depreciation, which is the largest single cost in every other column. A lease trades the asset for certainty. Whether that is a good trade depends on what the car would have been worth, which is exactly what the resale figure above is testing.
What is the PCP final payment worth?
On a PCP you may hand the car back instead of paying the final payment, which is an option to sell at a guaranteed price. It is worth something only when the car is worth LESS than that payment, and the finance company takes the loss. When the car is worth more, the option is worthless and handing it back gives away your equity. The figure above shows which situation you are in.
Does this count insurance and fuel?
Yes, through the running costs field, and they are the same for every route, so they do not change which is cheapest. They do change whether you can afford any of it, which is why an option that runs out of money says so rather than quietly presenting a total.
Is this financial advice?
No. It is arithmetic on figures you enter, and it deliberately does not rank the options or recommend one. CoreFi does not arrange or broker car finance and this page will not pass your details to a lender.
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Not financial advice. This calculator gives an indicative estimate of business finance for limited companies. It is not a quote, an offer, or a credit decision, and no credit search is run. CoreFi is a trading name of JG Core Ltd (company 16218779), a finance broker not a lender, and may receive commission from the lender. Figures reviewed 15 September 2026.