We try and make buying a car as simple as possible here at Hatfields and we understand the all the finance jargon can be a bit confusing, so we have created a glossary of some finance terms you may come across when buying a car.
APR stands for ‘annual percentage rate’ which calculates the interest rate for your finance agreement, including all relevant fees and charges, over a whole year rather than just your monthly fee. APR allows you to compare the cost of borrowing from a number of alternative channels.
To reduce your monthly payments, a larger payment called a ‘balloon’ or ‘residual value’ can be made at the beginning or end of your agreement. Most often customers pay a balloon on their final payment.
Under a conditional sale agreement we would pay for a vehicle on your behalf and allow you to pay for it in instalments. A deposit would be required for you to take possession of the vehicle, but it would still be legally owned by us, until all payments had been made. With all agreed payments made, the title of the vehicle passes to you.
Fixed rate finance means that the monthly payments you agree to pay stay the same throughout the agreement. Any interest on the loan is then spread across these monthly repayments to help you manage your outgoings.
A hire purchase agreement is similar to a conditional sale agreement. The only difference with hire purchase is that you don’t have to take legal ownership of the vehicle. Once all payments have been made you have the option to simply hand back the vehicle to us or to take title of the vehicle.
The loan term refers to the length of your finance agreement. This means that within the agreed time period, usually between 12 and 60 months, the loan will be repaid in full.
A personal loan is a loan that is granted for personal use for whatever you want to spend the money on. These types of loan are usually unsecured (i.e. not linked to an asset like a car or your home) and is based on your ability to pay back the loan.
Underwriting is the process that companies like Hatfields use to decide if a potential customer is suitable for a loan.