There is an awful lot of jargon involved in car finance, which makes it tricky to get your head around the facts of what you are being offered and what is the best option for your circumstances.
We have put together a list of key terms that are used within the car finance process. Treat the below list as your essential guide to understanding all that car finance jargon.
APR (Annual Percentage Rate)
The APR shows the total yearly cost of borrowing, bundling interest and compulsory fees so you can compare one car-finance offer with another.
Affordability Check
Before approving a loan, lenders balance your income against regular outgoings and living costs; Go Car Credit sets clear eligibility rules so you can see if the payments are likely to fit your budget.
Application Process
With a two-minute online form, you’ll receive a soft-search decision first and, if happy, a hard-search confirmation after you e-sign the agreement – see the Apply Now page for details.
Bad Credit
Specialist direct lenders such as Go Car Credit focus on borrowers with low scores, weighing recent behaviour and affordability more heavily than past blips.
Balloon Payment
Under a PCP you pay smaller instalments then decide whether to clear the large final “balloon” – MoneyHelper’s PCP guide explains how that last lump sum works. Please note Go Car Credit do not provide PCP agreements.
Black Box Car Finance
A telematics device reminds you to pay and reassures the lender, helping people with poor credit stay on track – see Black Box finance for full details.
Broker
A finance broker arranges loans with third-party lenders; if you prefer one point of contact, a direct lender deals with you and funds the loan itself.
CCJ (County Court Judgment)
A CCJ marks six years on your file and raises the cost of borrowing; specialist lenders run dedicated CCJ car-finance checks to keep options open.
Credit Score
Your credit score summarises past payment history; MoneyHelper outlines simple ways to improve it before you apply.
Deposit
Putting money down lowers the amount you borrow and the interest you pay; Go Car Credit also offers £0-deposit deals if you haven’t saved up.
Direct Lender
Deal directly with the company funding your loan – no broker fees and faster decisions, as explained in Go Car Credit’s about-us info.
Default
Missing several payments could lead to your lender issuing a default notice. If you don’t respond or take the required action, the default could be enforced. This may damage your credit record for six years.
Early Settlement
You can clear your balance at any time, saving future interest – simply request a settlement figure from the lender.
Equity
If your car is worth more than the outstanding balance you have “positive equity” to use as a deposit next time; if worth less, that’s “negative equity”.
Excess Mileage
Go beyond the mileage cap in a PCP or lease and you’ll pay a per-mile fee – plan realistically when you set that limit.
FCA (Financial Conduct Authority)
The FCA regulates car-finance firms and provides guidance on car-finance complaints and potential redress schemes.
Fixed Interest Rate
Almost all UK car loans use a fixed rate, meaning your monthly payment never changes over the term.
Finance Agreement
The legally binding contract that lists the loan amount, term, APR, fees and your rights – read it carefully before you sign.
Guaranteed Car Finance
Adverts claiming “guaranteed approval” are misleading; responsible lenders must still run affordability and identity checks.
GFV (Guaranteed Future Value)
The deferred amount in a PCP that becomes your optional final payment; if the market value is lower, you can just hand the car back.
Hard Credit Check
A full search recorded on your file when you proceed; Go Car Credit starts with a soft check then runs a hard check only if you accept the offer.
Hire Purchase (HP)
Spread the whole cost over 1-5 years with fixed payments and no mileage limits; MoneyHelper’s HP guide compares pros and cons.
IVA (Individual Voluntary Arrangement)
An IVA is a formal debt solution; some lenders will lend during an active IVA with your supervisor’s consent, but expect stricter affordability checks.
Interest Rate
The basic cost of borrowing expressed as a yearly percentage; the APR is higher if any fees are rolled into the loan.
Instant Decision
Automated underwriting gives many applicants a same-day yes-or-no, cutting the wait time at the dealership.
Joint Application
Two borrowers apply together, pooling income and sharing full responsibility – see Go Car Credit’s joint-finance info.
Joint Liability
In a joint loan, each applicant is “jointly and severally” liable, meaning either party can be chased for the whole balance if payments are missed.
KYC (Know Your Customer)
Identity and fraud checks (photo ID, proof of address) that lenders must complete before releasing funds.
Lease (Personal Contract Hire)
A long-term rental with fixed payments and no option to buy; MoneyHelper explains how PCH leasing works.
Loan-to-Value (LTV)
The ratio of the loan to the car’s price; a higher deposit lowers LTV and risk, often improving your rate.
Late Payment Fee
If a direct debit bounces, most lenders add a fixed late fee and may report the missed payment to credit agencies.
Mileage Allowance
Choose an allowance that matches your driving; excess miles on a PCP trigger charges at the contract’s end.
MoneyHelper
MoneyHelper is the UK’s free, impartial service for budgeting, credit and car-finance guidance.
Negative Equity
If your loan balance exceeds the car’s value, you’re in negative equity; voluntary termination can help once you’ve paid 50 % of the total.
No Deposit Car Finance
You can borrow 100 % of the price with Go Car Credit’s no-deposit option, but monthly payments will be higher.
No Guarantor Car Finance
Unlike some bad-credit lenders, Go Car Credit offers loans in your own name with no guarantor required.
Option-to-Purchase Fee
A small final charge (often £10) that transfers ownership at the end of an HP agreement.
Outright Purchase
Pay the full price in cash – no finance, no interest, and you own the car immediately.
PCP (Personal Contract Purchase)
Pay monthly for the car’s depreciation then choose to return, part-exchange or buy via balloon – MoneyHelper’s PCP explainer covers the details. Please note Go Car Credit do not provide PCP agreements.
Part-Exchange
Trade your existing car in at the dealer; any equity becomes your deposit on the new deal.
Personal Loan
An unsecured bank loan puts cash in your account so you can buy the car outright and own it from day one.
Pre-Approval
A provisional credit limit based on a soft search helps you shop with confidence before you pick a vehicle.
Quote
A written quote must show term, APR, fees and the total amount payable so you can compare offers side-by-side.
Qualifying Benefits
Certain stable benefits (e.g. DLA, PIP) can count as income with Go Car Credit’s benefits-friendly finance.
Repossession
If you default on HP or PCP, the lender may repossess the vehicle; after one-third of the total is repaid they usually need a court order.
Representative APR
Advertising rules require lenders to quote an APR that at least 51 % of accepted customers actually receive.
Residual Value
The car’s estimated worth at the end of a PCP or lease; a higher residual keeps monthly payments lower.
Soft Credit Check
An eligibility search visible only to you; Go Car Credit’s no-credit-check quote uses a soft search before any hard footprint.
Settlement Figure
The exact amount needed to clear the loan early, including any interest rebate and the option fee if unpaid.
Subprime Lending
Car loans aimed at people with weaker credit; rates are higher, but making payments on time helps rebuild history.
Term
The length of the agreement (e.g. 48 months); spreading over more months cuts the payment but increases total interest.
Total Amount Payable
The full cost of buying on finance, including deposit, instalments, fees and interest – check this figure in every quote.
Underwriting
Human or automated checks that verify your credit, income and vehicle before the lender signs off the loan.
Unsecured Loan
A personal loan not secured on the car; you own the vehicle outright but need stronger credit to qualify for the best rates.
Voluntary Termination (VT)
After paying half the total balance payable, you can hand the car back and walk away – Citizens Advice supplies a handy template letter. You can voluntary terminate at any time but if you have not paid half the total you would still owe the balance or any arrears balance outstanding.
Voluntary Surrender
If you can’t reach 50 %, you may return the car early but will still owe any shortfall after it’s sold and this would result in a default on your credit file.
Warranty
Many used cars come with a short dealer warranty; optional extended cover can also be rolled into the finance.
Young Drivers Car Finance
Go Car Credit accepts applicants aged 21+ with sufficient income and even offers guidance for young or student drivers.
Zero Deposit Car Finance
Finance the full price without an upfront payment – convenient for cash-strapped buyers but increases the total interest you’ll pay.
Zero Percent Finance
Manufacturer promotions offering 0 % APR on new cars; you’ll still need good credit and often a sizeable deposit.
