UK car finance glossary

APR (Annual Percentage Rate)

The standardised yearly cost of credit including interest and relevant charges, used to compare regulated agreements. See UK car finance rates.

Balloon / optional final payment (PCP)

A larger closing payment if you want to own the car at the end of PCP; otherwise you may hand the car back subject to condition and mileage. Covered in PCP vs hire purchase.

Cooling-off period

A regulated window after signing during which you may cancel certain credit agreements in defined circumstances. Explained in context in SECCI and paperwork.

Deposit

Upfront amount that reduces the amount financed. See lowering your payment.

GMFV (Guaranteed minimum future value)

The lender’s forecast of the car’s value at the end of PCP, used to set the optional final payment. Same guide as balloon above.

Hire purchase (HP)

Instalments with a focus on owning the car at the end after the option-to-purchase fee. How car finance works.

Negative equity

When the car is worth less than the settlement needed to clear finance. Negative equity guide.

PCP (Personal Contract Purchase)

Finance with lower monthly payments and a large end payment if you buy the car; mileage and condition rules apply if you return it. PCP vs HP.

Representative APR

The rate at least 51% of accepted customers received for that product; your offer may differ. Rates guide.

SECCI

Standard European Consumer Credit Information — the standardised pre-contract disclosure for regulated credit. SECCI explained.

Settlement figure

Amount the lender quotes to clear the agreement on a specific date. Ending finance early and selling a financed car.

Voluntary termination (VT)

Statutory right to end some regulated agreements early in defined circumstances after paying a proportion of the total amount payable — not the same as casual handback. Ending finance early.

Hard vs soft credit search

Hard searches usually follow applications and are visible to other lenders; soft checks are lighter-touch. Credit score guide and bad credit finance.

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