Car finance, in plain English

The yearly interest rate charged on your loan, shown as p.a. It is the main driver of how much extra you pay on top of the car price.

A large lump sum owed at the end of some car loans. It keeps your weekly payments lower but leaves a big amount to clear at the finish.

A lender is who gives you the loan. A broker or referral service helps you find the right lender. Fair Finance is the latter, not a lender.

The main New Zealand law protecting people who borrow money. It requires lenders to lend responsibly and be clear about costs.

A rate that combines the interest rate with standard fees, so you can compare loans on a fairer basis than the headline rate alone.

When a lender looks at your credit history to help decide on a loan. Checks can be soft, which leaves no mark, or hard, which does.

A number that sums up how you have handled credit in the past. Lenders use it to help decide whether to lend and at what rate.

Extra interest a car dealer adds to a finance rate to make a profit on the loan. It can cost you thousands over the term.

When you miss payments or break the loan agreement. A default can be recorded on your credit file and stay there for years.

Money you pay up front toward the car, with the rest borrowed. A deposit lowers how much you finance, but it is not always required.

A one-off fee a lender charges to set up your loan. It is part of the real cost, so check it alongside the interest rate.

Someone who agrees to cover your loan payments if you cannot. A guarantor can help you get approved when your own situation is borderline.

A formal credit check that is recorded on your file. Too many in a short time can lower your score, so it pays to apply carefully.

A way of buying a car where you pay it off in instalments and only own it once the final payment is made. Common for car finance in New Zealand.

How long you have to pay the loan back, usually one to seven years. A longer term means lower payments but more interest overall.

When you owe more on your car loan than the car is worth. It is common early in a loan or with long terms and no deposit.

A public register that records loans secured against things like cars. It shows if money is still owed on a vehicle before you buy it.

Documents that show what you earn, like payslips or bank statements. Lenders use them to check a loan is affordable for you.

Replacing an existing car loan with a new one, usually to get a lower rate or smaller payments. It can save money or free up cash flow.

When a lender takes back a car because the loan was not paid. It is a last resort and there are rules the lender must follow first.

What a car is expected to be worth at the end of a loan. It is used to set some balloon payments and to judge lending risk.

The duty lenders have to make sure a loan is suitable and affordable for you. It is a legal requirement under the CCCFA.

A car loan where the car itself is used as security, so the lender can repossess it if you stop paying. Rates are usually lower than unsecured loans.

A look at your credit file that does not affect your score. It gives an early read on your options without leaving a mark.

The full amount a loan costs you, including all interest and fees, not just the amount you borrow. It shows the true price of finance.

A loan that is not tied to your car or any other asset. Nothing gets repossessed if you miss payments, but rates are usually higher.