Glossary of Financial Terms

APR
The Annual Percentage Rate ("APR") calculates the interest rate you are paying for a whole year and is quoted to allow you to compare differing finance options. APR includes any upfront or Title Transfer Fees spread over the period of the loan.

Credit Rating
Your Credit Rating is a measure of how good you are for credit. There is no fixed number or scale for this - every finance company assesses your credit rating using their own rules, dependent on your credit search and other factors.

Credit Search
Credit Agencies collect information on the credit history of people in the UK. When someone applies for credit, a finance company will carry out a credit search by obtaining this information to assess your credit rating. You can obtain a copy of your credit profile by clicking here.

Equity
This is the amount of value in your asset once the finance outstanding is deducted - e.g. if your car is worth £10,000 and you still have £4,000 on finance then your equity is £6,000.

Flat Rate
Car dealerships often quote a flat or fixed annual rate. It is quite different to, and usually half the rate of the APR. E.g. if you borrow £10,000 for 3 years with a 10% flat rate then the interest would be 3 x £1,000 = £3,000.

Hire Purchase/Conditional Sale
Two very similar financial agreements where the asset is hired and then at the end of the agreement - usually with the payment of a Title Transfer Fee - it becomes their property.

Lease
A Lease is a hire agreement under which the asset never becomes the property of the hirer. At the end of the primary period of the agreement the asset can be sold to a third party or the customer can continue hiring the asset indefinitely. Leases can have tax benefits and are offered by our Business Finance Division.

Trade Value
This is the value of a vehicle 'in the trade', i.e. the value that a dealer/garage would pay if you sold them the vehicle.  It is important that the amount financed is not too high compared with the trade value.