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Vehicle Finance Terms and Abbreviations

Book value
The value of a pre-owned vehicle.

Borrower
A person who obtains credit from a lender with the understanding that repayment is expected within a certain period.

Capital amount
The initial amount financed by the bank.

Comprehensive insurance
Coverage that pays for property loss caused by theft, vandalism, fire, flood, hail and glass breakage.

Credit history
A record of an individual’s paid and unpaid debts. A credit history helps a lender to decide whether a potential borrower is a suitable candidate for a loan.

Credit report
A report reflecting an individual’s paid and unpaid debts. It consists of a person’s credit history and payment profile.

Creditworthiness
A consumer’s eligibility to borrow cash based on the number of accounts opened, the types of accounts, payment history and account balances.

Debt
The amount owed to the lender.

Depreciation
The older the vehicle, the lower its value. This is referred to as depreciation.

Equity
The value of your vehicle, minus the total amount owed on it.

Extended warranty
An extended warranty to the existing warranty that comes standard with your vehicle, the most common being a 2 Year, Unlimited km warranty.

Fixed rate loan
The interest rate remains stable throughout the loan term.

Finance calculator
To find out about repayments, interest rates and terms.

Inspection
The mechanical and physical evaluation of a vehicle. The car gets a full body search, so to speak.

Instalment plan
Buying a vehicle on credit and making payments regularly for a certain period.

Interest
The cost of borrowing money.

Interest rate
The amount of interest charged on a loan, usually expressed as a percentage per year.

Lender
The individual or company that finances a borrower with the understanding that those funds must be repaid, with interest, at regular intervals. The lender can be a bank, credit union or finance broker.

Loan
A financial agreement between a lender (usually a bank) and a borrower, where the bank lends money for an agreed period and the borrower is required to repay every cent, with interest, over an agreed period.

Loan balance
The amount owed on a loan after deducting the payments made.

Loan contract
The written agreement between a borrower and a lender, which states the terms of the loan.

Manufacturer
The original producer of a vehicle.

Monthly Instalment
The monthly amount due to the finance institution to repay the initial loan which consists of capital and interest.

Obligation
The borrower’s legal responsibility to repay a loan.

Private to private finance
Purchasing a vehicle from a private individual.

Payment holiday
The period of time, usually one to two months where a client does not have to pay an instalment to the bank for their vehicle. It is the window period from when the refinancing company settles the initial loan and when the first instalment becomes due for the new finance agreement.

Qualify
The ability to meet a lender’s criteria for granting credit.

Rate
The annual rate of interest on a loan, expressed as a percentage.

Refinance
Refinancing refers to the replacement of an existing debt obligation with a debt obligation under different terms, with the objective decreasing one’s monthly instalment or shortening the term.

Residual/Balloon
Balance due at the end of the finance agreement.

Term
The length of a loan, usually expressed in months or years.

Vehicle Identification Number (VIN)
This is your vehicle’s unique fingerprint. The 17-digit alphanumeric number is usually located on the dashboard as well as embossed somewhere on the vehicle’s chassis and furthermore there is a chassis plate either riveted somewhere on the vehicle body, usually in the engine compartment or as with the newer vehicles instead of a metal plate there is a non-removable sticker reflecting the vehicle’s chassis number and various other details.

Warranty
A guarantee from the dealer or manufacturer that a vehicle will perform as specified. Warranties usually cover specific mechanical or electrical problems for certain mileage or periods, i.e. 100 000km/5-year manufacturer’s warranty.

 

 

 

 

 

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