APR (Interest rate)
APR stands for annual percentage rate; this is how much extra you’ll have to pay back on top of the amount you borrow. This is usually represented as a percentage of the amount outstanding. The APR affects how much money you pay back on top of the loan amount.

Agreement term
This is the agreed fixed length of time in which you have to repay the finance.

Annual mileage
Is amount of mileage a car on finance is allowed to drive each year, be aware not to underestimate your mileage as you’ll be charged extra if you go over the agreed limit as agreed within your finance agreement. The added charge is set by the lender and should be disclosed within your finance agreement.


A credit broker will help link someone looking for credit and will usually work with a panel of lenders and dealerships. Credit brokers earn commission from the introduction of business, this will vary based on the product and the loan amount, therefore they do not generally charge a fee for the services they provide.

Balloon Payment (GFV – Guaranteed future Value)
A balloon payment or GFV as it can be referred to is a one-off lump sum paid at the end of your finance agreement to purchase the vehicle outright. The amount of the balloon payment is decided at the start of your finance agreement and is specific to PCP agreements.

Balance to Finance
This is the total amount of credit after considering any part exchange, settlements and or deposits on a finance agreement and is the amount you will be charged interest on the repayments.


Credit Score / Credit profile
A credit score is an overall rating of an individual’s credit history which allows a business to assess the individual’s ability to borrow money and pay it back. It can also be made up of voters roll history, associations, good and bad debt, types of debt and number of credit accounts, amount of credit searches completed and geographical location.
The higher the individuals credit score, the more likely that an offer for credit or car finance will be achieved, lower scoring customer may experience difficulty in obtaining credit or it may be at a higher rate of interest.

Credit reference agency
Credit reference agencies create, record and maintain individuals and business credit profiles. The information reported about your credit history is gathered to develop a credit profile which can then be calculated into a credit score based on this information.

Consumer Rights Act
The Consumer Rights Act 2015 is an Act that consolidates existing consumer protection law legislation, it aims to protect consumers against poor-quality products and unfair business practices or contract terms with regards to transactions, repairs, refunds, and delivery.

Commission Disclosure
A broker should disclose the existence of commission to a customer, prominently and upon request disclose (within 5 business days) the nature of the arrangement, the amount and how or if this may affect the amounts payable by the customer.

Conditional approval
A lender may provide a conditional approval which will be subject to certain requirements or additional checks, this is not a guarantee of an offer of finance until the lender has confirmed a full approval.

County Court Judgment (CCJ)
A County Court Judgment is a court order that may be awarded when an outstanding sum is not repaid, it is recorded on your credit profile for a period of 6 years and can make credit difficult to obtain or result in a higher rate of interest.


Is the amount paid at the start of your finance agreement, the higher the deposit payment against the amount of borrowing will affect the amount of interest payable over the term of the loan.

Depreciation is due to the decrease in value of a vehicle, most vehicles will depreciate for various reasons, including but limited to the age, mileage, damage

Debt Management Plan (DMP)
A Debt Management Plan is an informal agreement managed by a debt management provider. You are still able to apply for finance when you have an active DMP however, you would need to discuss this with your DMP provider to ensure it is affordable.


Once you have paid for your vehicle it them becomes equity as it’s an asset you own, the term equity is also used when the vehicle value exceeds the amount you owe on your vehicle.

Electronic signatures, most finance companies will allow customers to sign electronic contracts, giving the customer the time and convenience to sign their documents.

Early settlement
A customer may decide to settle their finance earlier than the agreed term of the contract, this must be arranged directly with the lender.


Financial Conduct Authority
The Financial Conduct Authority is an independent body that regulates the financial services industry in the UK.

Financial Ombudsman
The Financial Ombudsman is a free service for customers, they settle complaints between consumers and businesses.

Fixed rate Interest
Means the interest rate is set at the start of the agreement and remains the same for the term of the
finance agreement


A guarantor is usually required for specialist loans, younger people or those with little or no credit history. Generally, this will usually be a parent or close relation whom will agree to take on the debt if the individual cannot maintain the repayments.

General Data Protection Regulation (GDPR 2018)
GDPR provides a legal framework for keeping everyone’s personal date safe, The Act requires firms to have robust processes in place for handling and storing personal data.


Hire Purchase (HP)
Is a finance deal that may involve a deposit being paid and the remaining funds borrowed is required to be repaid back monthly over the term of the agreement. The customer is not the legal owner of the vehicle until all payments have been made.

Hard Searches
A Hard Credit search is when a company carries out a detailed search of your credit profile, a hard search appears on your credit profile and may impact your credit score.


Individual Voluntary Arrangement (IVA)
An IVA is an agreement made with creditors to back all or part of your debts over a period of time. You may be able to obtain a finance agreement whilst under an active IVA however the IVA company would need to agree permission for this.

ID Verification checks
An ID check ensures that there is a real person behind the application, and they are whom they claim to be. ID checks prevent anyone from applying on someone else’s behalf without their knowledge, creating false identities and or committing fraud.


Joint Application
Two or more people are able to apply and sign afinance agreement, together they would be responsible for the repayment of the finance.


A MOT is a vehicles annual safety inspection, all vehicles over 3 years old are required to have a valid MOT certificate to prove it is roadworthy.


Negative Equity
Negative equity is when a cars value has depreciated and is worth less than the amount you still owe under the finance agreement.


Option to purchase fee
Is a payment made at the end of some finance agreements which transfers title of ownership from the lender to the customer.


Personal Contract Purchase
A PCP finance agreement is repaid with monthly payments, an initial deposit is generally required. The ownership of the vehicle does not transfer unless the balloon payment at the end of the agreement is repaid.

A proposal is an application usually submitted on your behalf from a dealership, which contains all required information in order for an assessment for finance to be considered.

Personal Loan
A Personal loan agreement is not secured against the vehicle and therefore the legal title transfers to the customer immediately.

Part Exchange
Trading in your current vehicle against a new car, it can be used instead or alongside of a deposit towards the new vehicle.


Representative APR
A representative APR may be different to the actual APR you might be offered when applying for car finance.

Representative example
A Representative example is used in advertisements and should be 51% of the businesses customer has received the same or lower rate.

Regulated dealership
Is a dealership regulated with the Financial Conduct Authority, you can check a dealerships detail on the FCA register. www.register.fca.org.uk


Soft Searches
A soft search is conducted against a credit profile however, unlike a hard search only you will be able to see this recorded on your credit profile and it will not affect your credit score .