| 0% finance | | | | the item being repossessed by the lender, who will |
| An interest-free loan -- you repay only the amount | | | | then sell it to recover the outstanding debt. |
| of money you borrow. Such loans are often offered | | | | Interest only |
| on items that manufacturers or dealers are keen to | | | | Your regular repayments to the lender cover only |
| sell, perhaps because it is an unpopular model or it is | | | | the interest accrued during the regular repayment |
| about to be replaced by a new model. The deposits | | | | period. The capital amount of your original borrowing |
| might be large, sometimes up to 50% of the list price | | | | remains the same, and must be repaid at some fixed |
| of the item. | | | | future date. |
| APR | | | | MGFV |
| Annual percentage rate. The true cost of a loan, | | | | Minimum guaranteed future value. Most vehicle |
| including all the interest and concomitant charges and | | | | manufacturers guarantee that a car will be worth a |
| fees. The lower the APR is, the cheaper is the loan. | | | | certain amount at the end of the personal contract |
| Balloon payment | | | | purchase (PCP) payment period, usually equal to the |
| The final payment at the end of a personal contract | | | | final lump sum you can pay to buy the car outright. If |
| purchase (PCP). | | | | the car is worth less than this, you can hand it back |
| Bank base rate | | | | to clear the loan. If it is worth the same or more, |
| The interest rate set by the national bank. Finance | | | | you may be able to use its value as a deposit on a |
| houses add their own percentage to the base rate | | | | new car. |
| to calculate interest on loans. When the bank base | | | | PCP |
| rate changes, lenders' rates change accordingly. | | | | Personal contract purchase. The monthly repayments |
| Capital amount | | | | are made lower by setting aside part of the vehicle's |
| The amount that you borrow from a lender. | | | | value as a lump sum to be paid at the end of the |
| Compound interest | | | | loan period. You can either pay the lump sum and |
| The most common type of interest, where interest | | | | own the car outright, or use your stake in the car as |
| accumulates not only on the amount you borrow, but | | | | a deposit to buy a new one. |
| also on the interest itself if your regular repayments | | | | Personal loan |
| are less than the interest accrued during the regular | | | | This is similar to hire purchase (HP), but the loan is |
| repayment period. | | | | unsecured; so, the lender cannot repossess the item |
| Conditional sale | | | | if you do not repay the debt. The lender can, |
| Another term for hire purchase (HP). | | | | however, still sue you in Court to recover the money |
| Cost to change | | | | still owed. |
| The difference between the trade-in price a dealer | | | | PX |
| would give you for your car and the cost of the car | | | | Short for part-exchange, meaning that you trade in |
| you would buy from the dealer. | | | | your car or other item as partial payment to get a |
| Deposit | | | | new one. Its part-exchange value is usually |
| The amount of money you pay towards the cost of | | | | considered to be much less than its actual value, |
| the item at the time of the purchase. | | | | because the trader must resell it. |
| Depreciation | | | | Repayment mortgage or loan |
| The amount of money the item loses in value over a | | | | Your regular repayments are greater than the |
| given period, usually annually. | | | | interest accrued during the regular repayment period. |
| Early repayment | | | | Thus, the capital amount that you borrowed |
| If you decide to repay a fixed-term loan before its | | | | decreases gradually. This means that the accrued |
| termination date, the lender will almost certainly | | | | interest proportion of the repayments and the |
| charge you an early repayment penalty. Such penalty | | | | amount you owe both become steadily less, until the |
| usually decreases over time, until it disappears | | | | capital amount is paid off completely. |
| altogether after a stated period. | | | | Residual value |
| Equity | | | | The value of your new car or other item after a |
| The difference between the prevailing value of the | | | | specified period of time and/or usage, according to |
| item and the amount of money you still owe for it. If | | | | trade reckoning. For example, three years or 60, 000 |
| what you owe is greater than the value of the item, | | | | miles, in the case of a car. |
| it is called 'negative equity'. | | | | Secured loan |
| Fees | | | | A loan which gives the lender a lien on your property. |
| Extra charges added by the lender. Be careful to | | | | If you default on the loan, the lender can take |
| understand the full costs of the loan by looking at | | | | possession of the property, and sell it to recover the |
| the annual percentage rate (APR). | | | | debt. |
| Flat rate | | | | Simple interest |
| The amount of interest payable per year as a direct | | | | See 'Flat rate'. |
| proportion of the amount borrowed, without | | | | Trade value |
| compounding. It is also called simple interest. | | | | The estimated price your car or other item would |
| HP | | | | fetch if sold at auction or by one dealer to another. |
| Hire purchase. The total amount you pay, i.e., the | | | | It is always much lower than the price dealers charge |
| purchase price of the item plus any interest | | | | retail customers. |
| throughout the entire repayment period, is divided | | | | Unsecured loan |
| into equal monthly payment instalments. Only after | | | | A loan which does not give the lender a lien on your |
| you have paid the final instalment does the item | | | | property. There is greater risk to the lender, and |
| belong to you. Failure to repay the loan will result in | | | | such loans are therefore more expensive. |