When buying a car, the monthly payment can be one of the most misleading numbers on the table. A recent comparison of five common ways to pay for a car—hire purchase, PCP, leasing, a personal loan and buying outright—shows why looking at the total cost matters more.

Using a £35,000 Audi A3 Sportback over four years, hire purchase required a £3,500 deposit and monthly payments of about £791. PCP reduced the monthly figure to £545, while leasing cost roughly £377 a month after an initial payment equivalent to three months’ rent. Buying outright required the full £35,000 upfront.

However, once ownership and depreciation were included, the ranking changed. Assuming the car retained a value of about £17,000 after four years, buying outright produced the lowest net cost at approximately £17,850. Leasing followed at £18,837, while hire purchase cost £24,318. PCP was the most expensive at around £26,665 when the final balloon payment was included.

The figures will vary with interest rates, vehicle depreciation and manufacturer incentives, but the lesson is consistent: a lower monthly payment does not necessarily mean a cheaper car.

Buyers should also consider opportunity cost. Paying cash ties up capital that could potentially earn a return elsewhere, although investment returns are uncertain while borrowing costs are fixed.

Ultimately, the right choice depends on how long you plan to keep the car, whether you value lower monthly payments or lower overall costs, and how the purchase fits with your wider financial goals.