If you're financing a van, the two structures you'll run into most are Hire Purchase (HP) and PCP-style balloon finance. Both spread the cost over fixed monthly payments, but they split the risk and the final ownership question very differently. Here's how they actually compare on a realistic £20,000 panel van.
The headline numbers
Assume a £20,000 van, a 10% deposit (£2,000), a 48-month term and a representative APR of 10.9%.
- HP: No balloon — you're paying off the full £18,000 balance. Estimated monthly payment: around £458. Total repayable: roughly £23,980.
- PCP (35% GFV): A £7,000 balloon is deferred to the end. Estimated monthly payment: around £343. Total repayable including the balloon: roughly £23,460, assuming you pay the balloon at the end.
PCP looks cheaper month to month — around £115 less here — but only because a chunk of the cost is pushed to the final payment. If you plan to pay the balloon and keep the van, total cost across both routes ends up broadly similar; the real difference is cash-flow timing, not free money.
Where HP wins
If you plan to keep the van for years, do high mileage, or want zero ambiguity about ownership at the end, HP is usually the simpler and often cheaper long-term route — there's no mileage cap, no end-of-term inspection, and no balloon to plan for.
Where PCP/balloon wins
If you run a business that likes to refresh its fleet every few years, or you want the lowest possible monthly outgoing while cash is tight, a balloon structure buys you flexibility: hand the van back, pay the balloon, or roll into a new agreement.
Try it yourself
Run your own numbers on the HP calculator and the PCP/balloon calculator side by side.
The bottom line
Neither structure is universally "cheaper" — it depends on how long you keep the van and how you value monthly cash flow versus total cost. If in doubt, model both using the exact price, deposit and term you're considering rather than relying on rules of thumb.