Your Car Finance Glossary November 28, 2019

If you’re thinking of buying your next new car on finance, then finding a deal that suits your unique situation is crucial. Luckily, there are a range of car finance deals and options out there, but it can be difficult to navigate the finance maze – especially if you’re in a hurry to replace your car.

Luckily, we’ve compiled a list of some of the most commonly used car finance terms, to make your search a little easier.


This is your Annual Percentage Rate, or the amount of interest you will pay on a loan for an entire year. This will remain fixed throughout your agreement.

C- Credit Score

Your credit score is a number, typically between 300 and 850, based upon factors in your spending history, such as loan repayment, credit utilisation and your history of inquiries. It is used by lenders to determine, at a glance, how likely you are to repay them consistently, and on time.

Some lenders will refuse individuals with a bad credit score. Fortunately, there are companies who still offer cheap car finance, and zero deposit car finance, to customers with bad credit scores.

D- Deposit

Although no deposit car finance is becoming increasingly popular, some agreements will require you to put down a deposit to secure your finance. The exact amount varies depending on the type of finance agreement you opt for – for instance, a PCP agreement (see below) allows for no deposit car finance options, whereas a PCH may require several months’ initial payment upfront.

Zero deposit car finance is a great option for anyone who does not have the time or means to save up a large lumpsum for a car.

E- Early Settlement

You may find that you are ready to pay off the remainder of your car finance loan ahead of schedule. If this is the case, then early settlement can be made by paying a lump sum to the lender.

F- Fixed Payment

When a payment is fixed, this simply means that the interest rate will not fluctuate. Where you put down an initial payment, or opt for zero deposit car finance, the monthly payment amount you are quoted at the beginning of your agreement will remain the same all the way through, making it easier to exactly how much to budget each month.


The GMFV, or ‘Guaranteed Minimum Future Value’ of a car, is an estimate of the value the car will hold at the end of a car finance agreement. It is based on a number of factors, including its future age and how many miles it will have driven, based on the driver’s mileage allowance.

The GMFV is used in PCP agreements, and means that monthly payments can be kept low – even on no deposit car deals.

M- Mileage Allowance

Prior to the start of your agreement, you will be required to gauge how much mileage you will need to get out of your car each year. This is an important step in the application process, as it is a contributing factor to the cost of your monthly payments, and exceeding your mileage allowance will result in a fine per-mile at the end of your contract.


Short for ‘Personal Contract Hire’. This is a form of car finance in which the driver pays a set amount each month to ‘rent’ the vehicle. Although similar to PCP, it does not offer the same flexibility at the end of the agreement; the car is returned, without the option of purchase.


Short for ‘Personal Contract Purchase’, PCP is one of the most popular ways of financing a new car. It offers low, fixed monthly payments, flexibility over purchasing or returning the vehicle at the end of the contract, and the choice new get a new car with no deposit.

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