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0% finance
A loan for financing the purchase or part-purchase of a car on which no interest is charged by the provider. So the borrower only has to pay back the amount borrowed – the capital – over the period agreed.
A
Acceptance fee
A fee charged by a finance provider to cover the cost of setting up a loan. These might be incurred as searches with a credit reference agency to check the borrower’s identity, and of registering that the lender has an interest in the vehicle with a company called HPI Ltd. This company tracks the history of all registered vehicles, including information such as whether they have been involved in any total loss insurance claims, and whether any MoT certificate issued for the vehicle is genuine.
Administration Fee
This is a fee charged for making any changes to a credit agreement e.g. changing your address details.
Agreement Term
The length of time (often shown in months) during which you are required to repay the finance borrowed.
Amount of Credit
The total amount borrowed from your loan provider (excluding any of the fees mentioned above or other charges).
Annual Administration Fee
This is an annual charge for managing the agreement. The cost is taken into account when the Annual Percentage Rate (APR) is calculated.
Annual mileage
The number of miles a car that’s the subject of some types of finance agreement can be driven in any year. Usually, a finance provider will charge more in interest the higher the limit you are given or require.
Annual statement of accounts
A summary detailing all the payments made, and the amount still outstanding on any finance agreement, usually issued on the anniversary of the date any account began.
Approved in Principle
After an initial assessment of all the financial and other information provided, this means that a finance company is prepared to consider a loan of a certain amount. It helps to provide some certainty when you are in the early stages of looking for a car, and can help you move quickly to get the car you want.
APR
The Annual Percentage Rate, also called the interest rate. This is how much you’ll have to pay on top of any amount you borrowed in a complete year, expressed as a percentage of the amount still left to be paid.
Arrears
Any money owed under a finance agreement or other financial contract which hasn’t been paid on time.
Asset
The physical object which you borrow money against, e.g. a car or a house, property.
B
Bad Credit History
Also known as ‘adverse credit history’, this refers to people do not have a top-quality credit rating and may have experienced repayment issues in the past. You can check your credit history with reference agencies such as CallCredit, Experian, and Equifax.
If you have an adverse credit history, it’s still worth talking to us about your specific circumstances. We don’t just take credit scores into account and we often provide finance for people who struggle to get finance elsewhere.
Balance
The amount of money you initially need to finance – usually the price of what you’re buying less any deposit. As you make payments to pay off a loan, it then describes the amount still left to be paid.
Balloon payment
A lump sum which does not become due for payment until the end of a finance agreement, and is agreed at the start of the contract. Common in lease purchase finance agreements, it is a way of reducing the level of your monthly repayments. At the end of your agreement, you can make the optional balloon payment, and buy the car outright.
Basic Rentals Paid
The amount in cleared funds that you have already repaid to us (this will exclude the Final Basic Rental).
C
Capital Balance
The Capital Balance shows the amount outstanding for the finance agreement, plus any interest or other sums that have accrued over the course of the agreement.
Classic Car
There is no absolute definition of this, but generally it’s accepted to be a car that’s at least 20 years old, and which has been kept in or restored to its condition and appearance as originally specified by the manufacturer.
Cleared Funds
This refers to funds that have been processed by a bank and are available for withdrawal
Conditional Sale
A sale in which the buyer only receives the full rights of ownership of the goods involved once they have fulfilled some condition – usually the full payment of the purchase price. So it is often used to describe an agreement to buy a car after the payment of a deposit, but before any finance which is the subject of a separate loan agreement has been received.
Consumer Credit Directive (CCD)
This is a directive issued by the European Union which aims to ensure transparency and thorough customer protection when you buy anything on credit. It covers all agreements involving amounts of up to £60,260.
Contract
Any legally-binding document which relates to a third-party supplier of your vehicle and associated services, such as finance agreements or maintenance plans. These should always be read carefully before signing, as they may include terms relating to what happens if you end the contract early, or break any of its terms.
Contract hire
A hire agreement under which you are entitled to use a car, but don’t have an option to own the vehicle once the contract period has finished. You will usually make a fixed monthly payment for the whole term agreed, and at the end of the contract return the vehicle with nothing more to pay – provided you have kept to any conditions governing the maintenance and servicing of the vehicle and the mileage covered.
Cost of credit
A simple way of expressing how much using third-party finance costs on top of the amount borrowed, taking into account interest and any fees charged as part of the loan or finance agreement.
County court judgment
A court order which may be registered against you if you don’t repay any money you owe. It will set out how much is owed, and how and by when it should be repaid. Often shortened to CCJ, such a judgment can make it more difficult for you to get finance, and the interest rate you are offered.
Credit agreement
A document which shows the amount of money you have agreed to borrow, and that you have undertaken to make regular repayments towards paying back the loan in full, with any interest.
Credit Broker
A company or individual who arranges consumer credit for use in buying any product requiring it.
Credit history/record/rating/score
Your credit history is simply the historical record of all the money you have borrowed and the repayments made. Your record, rating or score is a measure of how you have managed your past credit and existing debt. Lenders use this information to decide whether they will approve any loan application, and what interest rates they will charge for money loaned to you.
Credit Reference Agency
These companies hold information on individuals and how they have conducted previous credit agreements. The information is made available to potential new credit providers to help them determine whether they will accept your application to borrow from them.
Credit search
The action of a lender looking at your credit history to help them decide whether you can afford to repay the money you have applied to have loaned to you.
Creditor
Any person, company, organisation or government to whom money is owed.
D
Debtor
Another word for a borrower, a person who has been lent money by a bank or other lender.
Default interest
Interest charged on top of that due under the normal terms of a finance or loan agreement when you fail to meet the terms of a credit agreement – for example, if you do not make a loan repayment on time, or miss it completely. This may be charged at the same or a higher rate than the interest on the loan amount itself.
Default notice
An official notification, in writing, that a person who has taken out a loan has fallen behind with their payments. It sets out the amount of money owed, plus any extra charges which will have to be paid to meet the cost of preparing the papers notifying them of the default, and the deadline by which this all has to be paid.
Deposit
Any initial payment put down towards the cost of your car or other goods before the start of any finance agreement. The amount you put down as a deposit will affect the level of your monthly repayments, and the higher it is, the more likely that your application for credit will be accepted, and the better the terms of the loan you may be offered.
Depreciation
The amount – expressed either as a cash figure, or percentage of the price paid – which a car loses in its value as it gets older.
The figure takes into account the car’s mileage and effects of wear and tear. In effect, it is the difference between what you paid when you bought the car, and what you get for it when you sell it later, expressed as a percentage of the original purchase price.
Discretionary expenditure
Money which you spend which can either be cut back or cut out completely to help you save money. A potential lender may ask for some information about the level of a loan applicant’s level of discretionary expenditure to help them decide whether they can afford the amount of the repayments involved.
Documentation Fee
This is a charge for setting up your finance agreement and issuing your documents. The fee is included in the total amount payable and taken into account when the Annual Percentage Rate (APR) is calculated.
E
Early Settlement
The term for ending a finance agreement before it is due to finish by paying off all the money outstanding. This may result in the lender adding on extra charges to compensate them for the interest they will miss out on due to the agreement not running for its full length.
End of contract charges
The cost of any repairs, parts replacement or refurbishment work needed to return a vehicle to a ‘reasonable’ condition for its age and mileage at the end of a lease period. There are official guidelines, laid down by the British Vehicle Rental and Leasing Association as to what constitutes the level of fair wear and tear which should be expected.
Equity/Negative equity
The value of your financial interest in a vehicle, worked out as the overall price of the car minus the amount of any loan which you have still to pay off. If your car is worth more than its guaranteed minimum future value, you can use this equity towards the deposit on your next car. However, if a car has lost so much value that it is worth less than the amount you still owe under your finance agreement, this is called negative equity.
Equity Release
A way by which the owner of a high-value car can realise some of its value, and get that money in the form of a loan for another purpose – usually to buy another vehicle.
Excess Mileage
Any miles that you cover over the amount specified under your finance agreement. For example, if your contract stipulates a maximum mileage of 30,000 and the car has covered 38,000 miles, the excess mileage is 8,000.
F
FCA
Standing for the Financial Conduct Authority, this independent body regulates the businesses which provide financial services in the UK, and has the job of ensuring that consumers are treated fairly and given honest information.
Fee
An amount of money charged by a business, institution or other body for a service provided. In terms of a loan, this will usually be intended to meet the cost of drawing up the loan agreement, obtaining credit references, and setting up the repayment method.
Final Basic Rental
Final Basic Rental means the final amount repayable by you, as specified in the agreement or quote.
Fixed rate
A term often attached to a credit agreement where the rate of interest to be paid is fixed at the time the money is borrowed for the entire term of the agreement. This gives you the advantage of knowing exactly how much you’ll repay each month throughout the time your agreement remains in place.
Final Payment
This is the last repayment to be made under a finance agreement. It may include an Option-to-Purchase Fee (depending on the agreement type) and a balloon payment.
Flat rate
The monthly interest rate charged on an amount borrowed for the length of the term of any agreement. It does not take into account the way in which the capital amount outstanding is reduced as payments are made. Do not confuse this with the Annual Percentage Rate (APR).
Full Service History
This describes a car which has been serviced at the intervals recommended by the vehicle manufacturer, by an approved dealership. The dealer verifies this by recording it in the car’s service book. It is a general indication that a vehicle has been well looked-after, and helps boost its resale value.
G
GAP Insurance
This – the GAP stands for Guaranteed Asset Protection – is an insurance product designed to help fill any payment gap between the amount received from an insurer when a car is written off in an accident, and either the amount outstanding under any finance agreement or its original purchase price.
Gross Income
This refers to your income before tax and National Insurance have been deducted. You may be asked for this information when completing the finance application.
Guaranteed Finance
This is a term no car dealer should use. There is no such thing as a guarantee that someone will have an application for car finance accepted. As a broker, JBR Capital has no control over whether a customer’s application for car finance is approved – it is up to each lender to make a decision, based on the criteria it uses to determine applications. As these vary between lenders, the information they require is merely presented in a way to help them make their decision.
Guaranteed Minimum Future Value (GMFV)
The amount your car is forecast to be worth at the end of any finance agreement. This is also the amount of any balloon payment which has to be met. It is worked out using industry data which has been collected over many years on every make and model of car.
Guarantor
Someone – usually a parent or close relative – who agrees to take on a debt if the person in whose name the debt has been taken out can no longer meet the repayments. This is often required when the applicant is comparatively young, has little or no credit history, or the loan is a specialist type for a particular product.
H
Hire Purchase
A way of breaking down the cost of buying a car into manageable monthly payments. You pay a deposit, and the rest of the purchase price is split into equal payments, made over a set number of months. Under a hire purchase agreement, you do not own the vehicle until the last payment has been made.
I
Instalment
An individual monthly payment amount, all of which go to make up a payment schedule. The number of instalments in any finance agreement is decided before the agreement begins.
INSURANCE
UK motorists are legally required to insure their vehicle. It’s also a requirement of all our finance agreements that you have arranged for comprehensive insurance cover to be in place for your vehicle at all times.
Interest free
A loan agreement on which no interest is applied for the privilege of paying over an extended period, meaning that the total price you pay is the same as the original purchase price. Also commonly referred to as ‘0% interest’ or ‘0% finance’.
Interest rate
The percentage of the purchase price, minus any deposit paid, which a lender charges in exchange for agreeing to lend money to the purchaser. Regardless of how long the money is loaned for, this is nearly always expressed as an Annual Percentage Rate, to help you compare the relative cost of different loans.
Invoice Price
The actual price paid to the seller or manufacturer of the goods being bought.
J
Joint application
Where two of more people apply for a finance product and both sign the loan agreement. Both then have equal responsibility for repaying the loan.
L
Late Charge
Usually a flat amount, charged when you miss a payment instalment due under a hire purchase, lease purchase or other loan agreement. It is usually added to the amount of debt still outstanding.
Lease Purchase
A way of financing the buying of a car. It’s similar to a personal contract purchase (see later entry), but in a Lease Purchase agreement the person to whom the contract applies commits to paying the balloon payment at the end of the agreed lease period, in order to buy the vehicle outright.
Leasing
An agreement between two parties, where the lessor – the owner of a vehicle – agrees to rent the vehicle to a lessee, in return for the payment of a monthly rental fee. This entitles the lessee to use the vehicle for an agreed period, on condition that they stick to any rules set out by the owner, for example over the number of miles they are allowed to drive during the period of the lease.
M
Maintenance
Carrying out of regular checks of the overall condition and replacement of consumable parts on a vehicle – e.g. tyres and windscreen wiper blades. Many maintenance tasks are carried out to a schedule determined by the manufacturer, and intended to keep the car running as smoothly and economically as possible, and free from unforeseen problems.
Max lend
A shortened form of maximum loan amount. A figure worked out by a lender using a number of set criteria to indicate the maximum amount of money a borrower can reasonably be expected to repay comfortably.
Maximum monthly instalment
An alternative way of expressing the above. After assessing an applicant’s financial situation, a lender may indicate a maximum monthly instalment amount which it believes they can afford. The amount they can actually borrow may then be adjusted by altering the repayment period of a loan.
Mileage Allowance
Usually expressed as a number of miles per year, a maximum amount of miles which a lender or lease or hire car provider will let a borrower cover in the vehicle. Penalty charges may apply if the total allowance over the whole of the period involved is exceeded.
MONTHLY RENTALS
The amount you pay every month under the terms of the finance agreement. They are referred to as rentals – rather than repayments – because you do not own the vehicle until all repayments, fees and any balloon payment have been made.
N
Net income
A person’s income after all tax and other legally required charges, such as mortgage, rent, council tax and utility bills, have been paid.
Non-discretionary expenditure
Spending that you are required to make by the terms of a contract, budget or other commitment. For example, mortgage, rental and council tax payments, and repayments on any loans which are outstanding.
O
On-Road Price
The total purchase price of a car to enable it to be legally driven away. In addition to the full purchase price, this usually takes into account the first registration fee (if the car is new), the cost of delivering it to your dealer, and your first payment of Vehicle Excise Duty (or road tax).
Option to Purchase Fee (OTP)
When an agreement is signed for a finance company to own a vehicle and hire it to the purchaser, the customer often has the option to buy the vehicle from the company once they have met all the payments due under that agreement. The Option to Purchase Fee – usually paid alongside the final instalment of a finance agreement – is paid to meet the cost of legally transferring ownership from the finance company to the customer.
Optional Final Payment
The amount of the total cost of a car which is deferred until the end of many types of finance agreement, which is also often called the Balloon Payment.
P
Part exchange
The name given to a car of your own that you exchange in part-payment towards the cost of a new car.
PCCI (Pre-Credit Contract Information) or SECCI
A list of details of a financial agreement which you must be given by law to help make sure that you are making the right decision in accepting its terms. This is most commonly in the form of a ‘Key Features’ document, which is presented in a standard format, and gives essential information such as the APR applying to your finance, number and frequency of payments, and the total amount owed.
PCP
Or, to give it its full name, Personal Contract Purchase. A finance agreement involving making monthly payments, and often an initial deposit. Your payments are designed to meet the value by which the car depreciates (loses its value) over the course of your agreement. You don’t own the car at the end of your agreement unless you decide to pay the optional balloon payment.
Personal loan
A loan of money, provided by a bank or other financial institution, and intended for personal use.
Q
Quotation search
A type of credit search designed to indicate to a finance company the level of risk you represent, and used as part of its process of deciding whether to accept a loan application. Also called a ‘soft search’, it’s designed so that it does not show up on your credit file.
R
Re-finance
Car finance products such as a Personal Contract Plan (PCP) or Lease Purchase include a balloon payment due at the end of the agreement. You may be allowed to re-finance this amount, subject to agreement by your finance company, but will incur extra interest and possibly additional fees for doing so.
Redemption
The settlement or early termination of a finance agreement.
Regulated Credit agreement
An agreement outlining the conditions attached to a finance product whose terms are regulated by the Consumer Credit Act 1974.
Repossession
A power available to a lender to claim or take possession of any property, assets or investments that have been provided as security for a loan when the borrower cannot repay the loan.
Representative APR
APR is the Annual Percentage Rate which applies to any loan. The APR figure takes into account not just the rate of interest charged, but also any fees payable, so can be used to compare the cost of different loans. A representative APR is a figure which any lender must show in any advertising of its loan products, and is the lowest APR which that lender will offer to 51% of the people who are accepted. Therefore, it’s important to note that it is not the same as the actual APR offered, which may vary.
Residual Value
The estimated value of your vehicle at the end of your loan or finance agreement. It is calculated using many years of data gathered across the motor industry.
S
SAF (Specialist Automotive Finance)
An accreditation scheme run by the Finance and Leasing Association. It provides training materials to finance companies and franchised car dealers designed to help ensure that car buyers are guided to the best products for their needs and budget.
SECONDARY FINANCE PERIOD
If you want to keep renting your vehicle once an agreement comes to an end, you may be able to arrange a second agreement, with a secondary finance period, for the same car.
Secured Loan
A secured loan is one, usually provided for larger amounts, in return for which the lender requires something belonging to the applicant as security against the loan. This is usually something of high value, such as their home or a car.
Settlement
The act of terminating a loan by paying off the amounts outstanding, including any charges if they apply.
Shortfall
The difference between the amount an insurer will pay out in the event of an accident, or a vehicle being written off, and the amount outstanding on any finance agreement. A specialised product, known as GAP insurance, has been devised to help protect car owners financially from the possibility of having to pay this shortfall.
Soft search
A common term for what’s also described as a quotation search (see earlier definition). The ‘soft’ term comes from the fact that a search of this kind does not leave a mark on your credit history.
Supercar
A loose term to describe an exotic car with very high performance and usually radical styling – although some definitions suggest that the single criterion is that of performance.
T
Term length
The length of time over which a borrower agrees that they will pay off a finance agreement, just about always expressed as a number of months.
Third party sources
A third party is an individual or entity which is involved in a transaction, such as granting a loan, but is not one of the principals. An example is a broker such as JBR Capital.
Thirds
A concept introduced under the Consumer Credit Act 1974. It established the principle that, provided a debtor has paid one-third or more of the total price of an item bought under a credit agreement, the creditor cannot repossess the goods without first getting a court order.
Title
In terms of a vehicle, the title is the vehicle registration document which provides details of its registered keeper – however, it does not prove that they legally own the vehicle, as this may be a third party under the terms of a finance agreement.
Total repayable
The total amount of money, including the loan sum, the cost of credit, interest and fees or charges, which have to be repaid to a lender if a loan is repaid in the agreed period. This figure has to be shown in any finance agreement.
Trade Value
The worth of a vehicle to a motor trader. Usually, it’s less than the price for which a vehicle would be sold for to a retail customer.
Transfer of legal title
What happens when all the amounts outstanding under a finance agreement have been paid, and the finance company surrenders any claim on the car and you take full ownership.
U
Underwriters
Specialist experts in finance whose job is to assess whether a potential customer is a suitable risk and can afford the payments on a loan.
Unsecured Loan
A loan where money is lent without any other asset, such as a vehicle or property, being offered in return as security.
Utilities costs
The amount paid by an applicant for a loan for lighting, heat and water where they live. Because these are payments required by law, they will usually be deducted from the applicant’s total income when assessing their suitability to be offered a loan, and the amount a lender is willing to provide.
V
Variable rates
If a loan or finance agreement has a variable rate of interest, the rate will change – and can increase or reduce – in line with the rate that the agreement is based upon. Most often this will be the Bank of England base rate. You might also see this referred to as a floating interest rate.
Vehicle Excise Duty (VED)
An amount in tax paid by the registered keeper of every vehicle to the government which allows that vehicle to be used on the public roads. Commonly known as ‘road tax’.
VIN
Vehicle Identification Number. Sometimes called the chassis number, every vehicle has a unique VIN which is used to confirm a car’s identity and prevent fraud. Unlike a number plate, a vehicle’s VIN cannot be changed.
Voluntary Surrender
A means by which a borrower can voluntarily give back or ‘surrender’ to their lender an asset – such as a car – when they can no longer afford to make repayments on any loan taken out for it. It allows a borrower to avoid a potentially lengthy legal process, court appearance and correspondence with their lender. However, the borrower’s credit rating may still be adversely affected, and they may have to pay any shortfall between the price realised when the asset is sold, and any outstanding finance.
Voluntary Termination (VT)
The right to terminate a finance agreement, and return it and the vehicle which is the subject of the agreement, to the finance company, usually after 50% (on a regulated agreement) or 80% (if the agreement is unregulated) of the total amount payable has been paid.
W
Warranty
A guarantee that if something goes wrong with a car (or other product) during a set time period, the manufacturer or seller will put it right. Specific terms, for example over how a vehicle should be used and maintained, may be attached and have to be satisfied before any claim can be made against the warranty.
Wear and Tear
A term used in the car industry and motor finance sector. It’s designed to distinguish items in the condition of a car which can reasonably be expected to occur through regular use and age, and those which might reasonably be suspected to be the result of neglect and/or poor or no maintenance.
Write-off
A car which is uneconomical to repair taking into consideration its value and the cost of such repairs, and which, as a result becomes the subject of a total loss insurance claim.
