The Wavertree Car Centre Car Finance Glossary
If anything puts buyers off car finance, it’s the baffling terminology which makes it sound far more complicated than it actually is.
At Wavertree Car Centre, we aim to make the process of securing car finance as easy and hassle-free as possible, so here are some of the key terms that you might need to know if you are considering applying.
For personal contract purchase deals, you will usually need to estimate the miles that you will cover in the car at the start of the contract. This is because monthly payments are dependent on the vehicle’s predicted depreciation, and the more use the car gets, the more its value decreases.
APR stands for Annual Percentage Rate and refers to the amount that you will pay back on top of the money you borrow.
At the end of a personal contract purchase agreement, you will be given the choice of returning the vehicle or keeping it by paying the remaining cost. In comparison to your monthly instalments, this will be a large amount, so it is known as a balloon payment.
Equity is the difference between the total value of the car and the amount left to pay. Negative equity is when the outstanding debt is greater than the car’s worth.
An individual who agrees to take on the payments if the borrower becomes unable to make the repayments is a guarantor. This extra reassurance can help you to get approved for car finance, especially if you are young or lack credit history.
Hire purchase car finance is a type of agreement which involves putting down a deposit and making a set number of monthly payments to pay for the car. Once the repayments have all been made, you will legally own the vehicle.
Personal Contract Purchase
Personal contract purchase also involves making a deposit, followed by monthly payments, but at the end of your agreement, you will have the option to either return the car and walk away, or make a balloon payment to take ownership of it.