Home < Blog < Car Finance < The A To Z Of Used Car Finance

The A-Z of used car finance

The A-Z of used car finance

The A-Z of Used Car Finance

As the largest used car supermarket in the South West, we secure millions of pounds' worth of car finance for our customers every year. However, if it's the first time that you've applied for car finance you might be baffled by some of the jargon!




Here's a rundown of some of the most common words you'll hear and what they mean:

Annual Mileage

With many car finance deals you are likely to find that an annual mileage limit is placed on as part of a car finance deal. If you surpass this total mileage in a year then you will be charged for each mile further you drive. If you know you will be using your car for long distances and are likely to be clocking up the miles, check this detail as it could add a significant cost to your finance plan.


This stands for Annual Percentage Rate and you'll see this on all financial quotes. The APR is how much interest you will pay on your loan annually. When you are reviewing your finance quote, look at the value of your car and the APR value - this will tell you how much you will pay back in total.

Balloon payment

A balloon payment allows you to hold onto a portion of your loan so you can make a lump sum payment at the end of your agreement. Doing this will reduce your monthly repayments but you need to ensure you can make the final payment.

Cash price

This is the amount of money the car will cost if you pay for it in cash immediately. While this cost will be lower than the total cost with a finance deal, few people have the money available in one lump sum and finance helps to spread the cost allowing you to get the best car you can afford.

County Court Judgements (CCJ)

A County Court Judgement or CCJ is a type of court order in England, Wales and Northern Ireland that may be registered against you if you fail to repay money you owe. This is something which you need to declare when you apply for finance and it will be visible when your credit record is checked.

Credit history/rating/record/score

Before agreeing to giving you finance we need to know what sort of borrower you are and we do that by reviewing your credit score. Your credit history is a financial record of all your borrowing and assets. It's important to aim to have a high credit score but don't worry if your score is low. Our Business Managers are experts in securing lines of credit and will know where and how to get the best used car finance deal for you.



This is the amount of money you will need to pay on the day you purchase your new car. It's taken off the total cost of the vehicle.


As your car ages and the mileage increases the value of the car lowers - this is known as depreciation.

Documentation fee

This is the fee to process the paperwork regarding your finance agreement - we try to keep this as low as possible but it's necessary to cover the costs associated with car finance.

Early settlement fee

If you choose to re-pay your loan early, then many lenders charge a fee for you to be able to do so. This figure is usually a percentage of the amount outstanding.

Equity/negative equity

The gap between what you owe for finance and the value of your car is called equity. If you wanted to buy a new car, then you can use your equity to do so. However, if the value of the car is less than the amount of finance outstanding then this is called negative equity and will be carried across into a new finance agreement if you purchase another car.

Fixed rate

This is an amount of interest, displayed as a percentage, which will not change throughout an agreed period.

Flat rate

This is a level of interest which is the same every month for the entire finance agreement.


GAP insurance

Guaranteed Asset Protection or GAP insurance is a type of specialist insurance which is worth having if you take on finance to purchase your car. This type of cover is intended to plug the gap between what you paid for your car and the amount your insurer pays out if it is stolen or written-off.

Guaranteed Minimum Future Value

When you buy a car using Personal Contract Purchase or PCP (see below) we will agree a minimum amount the car will be worth at the end of the loan period. This means that at the outset you can have a clear understanding of your vehicle's value throughout your financial period, which is particularly useful if you are intending to make a balloon payment.

HP - Hire Purchase

Most of our customers who buy a car on finance will use hire purchase. This is a form of finance whereby you agree to make monthly repayments at a fixed interest rate. It's ideal for those on a budget as the agreement is tailored to your individual circumstance, adjusting the agreement length according to how much you can afford.

Option to Purchase fee

At the end of a hire purchase period, you will have the option to buy the car - the amount you will be asked to pay is called the Option to Purchase fee.

PCP - Personal Contract Purchase

Personal Contract Purchase is like hire purchase but payments are smaller each month, leaving you with a larger balloon payment at the end should you wish to purchase the car outright. Alternatively, at the end of the agreement you simply hand the car back. Click here to find out more about our PCP car finance deals.

Residual value

Essentially another word for the Option to Purchase fee, the residual value is the amount you can buy the car for at the end of the lease, if you decide you want to buy the car.


This is the amount of time your finance agreement runs for - this is typically between 1-5 years.


Standing for Vehicle Identification Number, this is a unique sequence of numbers assigned to each vehicle. When you purchase a car it's important to check that the VIN on the vehicle matches the numbers on the log-book.

Ok, so we haven't covered the whole of the alphabet but this is all the essential lingo you need to know. At Carbase we aim to do all we can to help you secure a car finance deal which is right for you so if now is the right time for you to purchase a used car, get in touch with us today or drop in to see us.


Sub-prime finance is not guaranteed and may cost more than finance provided by a prime lender. We will try to obtain finance for you but there is no guarantee. It may be from a sub-prime lender, and if so, the cost of finance may likely be at a higher rate than prime lenders offer.


More Useful Articles

  • £0 Deposit Flexible Finance Deals

    Yes, £0 deposit! Here at Carbase, we can help you drive away a new vehicle with no deposit. Check our Car Finance Calculator ...

  • What Is HP Finance?

    With a commitment to trust and transparency, we here at Carbase pride ourselves on clear and concise customer service ...

  • What Is PCP Finance?

    Here at Carbase, we understand that vehicle finance can be confusing, especially if you're in the market for ...

Full price Monthly

Matches in stock: