If you’re looking to buy a new or used car you might find the process involves some confusing terminology. Here’s a short guide to help explain the most commonly used terms and take the stress out of the situation.
APR means the Annual Percentage Rate. It’s a way of working out how much the loan you’re considering will cost you in total, over the whole period of the loan. It’s important to compare APRs to ensure you get the best deal possible.
Bad Credit History
You may have a bad credit history if you have had problems repaying a loan in the past. If you have CCJs (County Court Judgements) against you, it can make getting a new loan difficult and possibly more expensive.
This is a contract between you and the lender. They offer you a loan and you sign an agreement to repay it over a pre-arranged period of time. You have the legal right to cancel a credit agreement within a few days of signing the contract but you may forfeit this right if you signed the agreement on the car dealer or lender’s premises. More information about your legal rights when taking out a credit agreement can be found on the Trading Standards’ website.
Also called credit scoring, credit history or credit record, this is on your current earnings and loans such as credit card debt and a record of your financial history. Organisations use this information to give you a credit score to which loan companies refer based on this they decide if you can get car finance from sites such as www.justcarfinance.co.uk and how much you will be charged for it.
This is the amount your car has lost in value over the time you’ve owned it due to wear and tear, the miles you’ve covered and the age of the vehicle.
The monthly interest rate charged on your loan. Do not confuse it with APR and take care if you are only offered flat-rate figures as it will make the loan sound cheaper than it really is.
If you take out a fixed-rate loan, the rate of interest that you are charged remains the same throughout the period of the loan, regardless of what happens to the base rate.
Usually the simplest type of car loan to organise, hire purchase involves paying an initial deposit then repaying the full amount over an agreed period of time. You will not own the vehicle outright until the final payment is made.
You can use your existing car as part-payment for another used car or for a brand new one. You may receive a better price if you part-exchange than if you sell privately.
This is an additional insurance policy which covers your loan if you fall ill or are injured and cannot work or are made redundant.
The amount your car is worth in the trade. The figure will be less than its retail value or if you sell it privately to enable dealers to make a profit on its resale.