Car Finance Terminology A-Z

Car Finance

What is APR?

When you borrow money, you are charged an interest rate. With our finance, the rate we offer depends on your credit profile. The interest rate is fixed at the same rate throughout the finance agreement.

The amount of interest payable on the amount you are borrowing is combined with any fees and charges payable under the agreement, to calculate an annual percentage rate (or APR). This is designed to help you compare offers from other finance providers. 

The amount of interest is included in your monthly payments and you agree to it upfront when you sign your agreement. 

The fees and charges payable are also set out in your agreement. At Oodle, these are a one-off 'opening fee' which is payable with your first monthly payment, and an 'option to purchase' fee (on our HP product) which you pay with your final instalment. Each of these fees is £50.

What is a credit score?

The amount of interest is included in your monthly payments and you agree to it upfront when you sign your agreement. 

The fees and charges payable are also set out in your agreement. At Oodle, these are a one-off 'document fee' which is payable with your first monthly payment, and an 'option to purchase' fee which you pay with your final instalment. Typically each of these is fees is £1.

What is a credit agency?

These CRAs create, update and hold your credit file. They gather information about your credit history, put this into a credit file and calculate a score for you based on this information. In turn, lenders will ask one or more of these agencies for information about you when they are assessing your credit application.

How do credit rating agencies work?

Each CRA is sent information by lenders about the credit you have and how you manage it. Other information, such as public records like the electoral roll, is also sent to the CRAs and forms part of your credit file. Once a CRA has enough information on you, they will generate your credit report and calculate your credit score.

Why do you have different credit scores?

Your Experian, Equifax and TransUnion scores may be slightly different because not all lenders report to every CRA. Some lenders only report to one or two CRAs, whereas others will report to all three.

CRAs also have different maximum scores. Experian’s score is out of 999, TransUnion's is 710 and Equifax has 700. 

So, your credit score might be 459 with Equifax, 999 with Experian and 609 with TransUnion, even with the same information. This is nothing to worry about – as long as your information is accurate, this won’t affect your creditworthiness.

What is a credit broker?

Credit brokers are individuals or companies that help link someone looking for credit, with a company willing to provide it. 

You will not be required to pay Oodle introducers any fees relating to the finance. Oodle pays any commission which may be due to our introducers as part of our commercial agreement with them.

Equity v negative equity?

Equity is the difference between your finance account and the value of your car. For example, if your car is worth £6,000 and there’s £4,000 left to pay on your account, there is £2,000 equity in your car. 

Negative equity would occur if the value of your car fell below the amount of finance left on your car finance agreement. We may be able to offer 'negative equity finance' under a Multi-Part Agreement (MPA) if it meets certain criteria. This would mean you could add the outstanding amount remaining on an existing finance agreement to your new finance deal with Oodle.

What is a DSAR and how do I request one?

The General Data Protection Regulation (GDPR) grants data subjects the right to access any personal data an organisation holds on them. This is known as a data subject access request (DSAR). You can request a DSAR from Oodle at any time by emailing DSAR@oodlefinance.com

What is the FCA?

The Financial Conduct Authority (FCA) is a UK financial regulatory body that operates independently of the UK government. 

The FCA works to ensure that consumers receive the service they deserve and that the UK’s financial market remains honest.

Can you explain interest rates?

When you borrow money, you are charged an interest rate. With our finance, the rate we offer depends on your credit profile. The interest rate is fixed at the same rate throughout the finance agreement.

The amount of interest payable on the amount you are borrowing is combined with any fees and charges payable under the agreement, to calculate an annual percentage rate (or APR). This is designed to help you compare offers from other finance providers.

What is an MPA?

A multi part agreement (MPA), is when the your arrangement includes a number of different elements, e.g. hire purchase, part exchange (with negative equity), and addons (ie paint protections or warranties). It will always include hire purchase.

What are car loans?

A car loan is a type of finance that helps car buyers cover the cost of their purchase. The buyer borrows a lump sum of cash upfront and then makes monthly payments over a set amount of time (which can vary depending on the agreement type). Some of the benefits of car loans include:

• Providing buyers with the opportunity to purchase cars without having to make the full payment up front.

• Flexibility: they allow buyers to spread their purchase over a period of time in a way that fits within their budget.

• They are usually paid off gradually, through smaller monthly payments, helping to keep ongoing costs manageable.

• You can get a car loan at lower interest rates than other types of personal or consumer credit, enabling buyers to save money in the long run.

As with any kind of finance, it's important to do your research to understand which of the options will work best for you, before you make an agreement with your lender. 

What are unsecured personal loans?

An unsecured personal loan is a type of loan that does not require any collateral, such as a house or car. It is, in essence, a type of credit extended to an individual based on their credit-worthiness and financial history. For example, if you need funds for a short-term purchase like a car and you don't have the means to pay right away, an unsecured personal loan may be suitable.

What is hire purchase?

Hire purchase, also known as HP, is a type of car finance available in the UK to help people buy either a new or used car. With HP, your monthly payments cover the 'hire' of your car, but you don't own it until you have paid in full (including the option-to-purchase fee).

Find out more about Hire purchase car finance.

What is PCP?

PCP is short for personal contract purchase or personal contract plan. This is an alternative way of financing a new or used car. A PCP arrangement incorporates a final 'balloon' payment at the end of the agreement which is based on the Guaranteed Future Value of the car.

Find out more about personal contract purchase car finance.

What is Underwriting?

Underwriting is the term used by finance providers to assess the risk of lending money to someone. 

Our underwriting process uses the latest online technology to review your application.

What is a VIN?

A VIN is a Vehicle Identification Number. 

Every vehicle in the world has unique VIN. Just like a fingerprint, no two vehicles will ever have the same VIN.

What is a warranty?

A warranty is a short-term guarantee on the car you buy, e.g. free 30-day cover, or a guarantee to cover certain problems. Oodle offer finance for certain type of warranties under the MPA. It’s possible to pay extra for longer warranties if that’s what you want. These warranties are usually backed by an insurance company.

It’s important to remember that warranties won’t cover wear and tear or accidental damage, and might have limits on the value or number of claims you can make during the period of cover, or which problems are covered. 

Warranties can be useful and give you some peace of mind, but you need to be clear on what’s covered and what isn’t. we may be able to offer finance for certain types of warranties under your new finance deal with Oodle.