Car finance can be a difficult thing to grasp, and especially for a newbie, the financial jargon can be extremely hard to understand. Many abbreviations and complicated terminology can go over your head, and this is when you can make the fatal error of signing on an extortionately expensive, suffocating and financially crippling dotted line. To begin, we will show you how to make sense of all the terms used, and we will then show you how to retrieve your personal credit report, in order to comprehend the better car finance deals for you.
● 0% Finance: There will be no interest charges added to your agreement
● Administration Fee: The fee chargeable to the borrower, for an agreement to be arranged. It is wise to discover how much this is prior to signing any contract as in some cases, especially for those with a poor credit report; this could be extremely high
● Annual Percentage Rate (APR): The cost of borrowing money, including annual charges based on a percentage rate – the more unscrupulous a company, the higher this will be.
● Balance Financed: The sum a borrower will need in order to buy a car. This will be the cars value minus the money you have paid through a deposit or part exchange.
● Balloon Payment: Also known as a ‘Guaranteed Minimum Future Value,’ this is the amount of money due to be paid at the end of the contract purchase.
● Conditional Sale: You will own the car after certain payment plans if you have stuck to the contract and the initial terms and conditions.
● Credit Rating: Ranging from ‘Poor’ to ‘Excellent,’ this describes how desirable and trustworthy you are as a loan candidate. The higher your score, the lower the overall price – and vice versa.
● Fixed Rate: This is when your quoted interest amount cannot be altered once in place
The UK new car market is the largest in Europe. This has a lot to do with credit being more freely available through many different sources such as payday loans, short-term loans, hire purchase and contract loans. According to the Finance and Leasing Association, in the year 2006 around 45% of new cars in the UK were bought through finance agreements. This figure was above 74% in 2013 and is predicted to be 85% at the end of this year – 2014. With the increased use of credit to purchase vehicles, the need to know your own credit rating through a credit report has never been greater. If you want to see where you stand with your credit score and receive your own credit report then you can by looking at Credit Reports from the Experts at Experian – the number one credit reference agency in the UK.