Car Loan Tips

Car Finance Glossary

100 Point Check: Before opening an account, by law a bank must verify your identity by reviewing certain identity documents such as your passport and driver's licence. Each form of identification is allocated a number of points and the total must add up to 100.
ABN (Australian Business Number): A number issued by the Australian Tax Office (ATO) to registered businesses in Australia. This number must be displayed on official paperwork and transactions for tax purposes.
Acceleration Clause: If you default on a car loan this clause allows the lender to speed up the rate in which the car loan is paid off. This can include an entire balance of the car loan to be paid off immediately.
Account number: A unique number that the bank allocates to your account.
Accruals basis: Transactions that are recorded when there has been an actual exchange of goods or services. Also known as Invoice Basis.
Accrued interest: Interest that is owed, but isn't yet due to be charged or paid.
Acquisitions: Includes items an individual buys, such as goods, services or equipment, for their enterprise.
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Additional repayments: Any money paid into a loan in addition to the prescribed minimum repayments.
Adjustment note: generally issued by a supplier and gives details of changes to consideration for a supply. This needs to be obtained from a supplier before an adjustment to claim additional input tax credits for an acquisition can be made..
Adjustments: in conveyancing, expenses which are calculated on settlement day, such as council rates and water charges, that the vendor has paid for but not used and which the buyer has not used but will be billed for.
Administration fee: A monthly fee that is charged by a bank for providing services and managing an account.
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Advice: a statement of opinion or recommendation that may influence a person in making a decision.
Advocate: an individual who acts or speaks on your behalf, particularly when communicating with authorities.
Agreement of Sale: Otherwise known as a sales or purchase agreement, this agreement basically states that the seller is selling the car and the buyer is buying the car under a specified set of terms. Both parties would then sign the contract.
All-in-one loan: allows you to use money from a loan account for day-to-day purchases. The longer spare funds stay in the account, the more you'll save in interest.
Appraisal: An estimate of the value of property, made by a professional appraiser.
APR: Annual Percentage Rate. A Standard method of calculating how much the loan will cost you over the full period of the loan. The APR reflects the total charge for credit and is different to the flat rate.
Arrears: the amount of money that has not been paid by its due date.
Asset (Secured): an asset that has been provided by you to secure a loan.
Asset allocation: the total amount of money you invest in different asset classes like shares and property. It is generally determined by your Risk Profile.
Assets: any property, money or goods you own from which a benefit can derive.
At call: money which is "at call" can be withdrawn from an account immediately.
ATO: Australian Taxation Office.
Attribution: rules which determine when a GST liability or an input tax credit entitlement arises in respect of a supply.
Balance (Final/Closing): the amount of money in a bank account at the end of a certain period of time.
Balance (Prior/Opening): the amount of money in your account at the beginning of a certain period of time.
Balance transfer: the transfer of whole or part of the outstanding balance of your credit card from one financial institution to your credit card at another financial institution.
Balloon payment: a large repayment, usually made at the end of an agreement to pay off a loan.
Bank: a financial institution authorised under the 1959 Banking Act which offers a variety of financial products and services.
Bank cheque: a cheque that is drawn by a bank rather than by a customer and can be purchased for cash and a small fee.
Bankruptcy: a legal process affecting individuals who are unable to pay their debts. A bankrupt person gives control of most of the debts and assets to a bankruptcy trustee who then decides which assets (if any) can be sold to pay off the debts.
Beneficiary: an individual or organisation that is entitled to receive the benefits generated by an asset which is legally registered in the name of another party, such as a trustee.
BFSO (Banking and Financial Services Ombudsman): a free and independent dispute resolution service that considers complaints about Australian banks and other financial services organisations.
Bill of sale: a written agreement where the original owner retains possession of goods but ownership is transferred. Used as security for a debt.
Borrower: a person who has borrowed money from a bank or other lender. Also called a debtor.
BPAY: a service that allows Australians to pay their bills using their credit cards or from their bank accounts using internet banking or phone banking. BPAY is registered to BPAY Pty Ltd ABN 69 079 137 518.
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Broker: A person who assists a client in negotiating contracts or assisting in the arrangement of funding, but does not loan the money themselves. ie. Advance Car Loans.
Break costs: charges for paying off a (generally fixed interest) loan before the end of its term.
BSB (Bank State Branch): a unique number which identifies both the bank and the branch of a particular bank in Australia.
Building society: a financial services organisation which provides services similar to a bank but owned by its members.
Capital: the value of assets such as a house, property and business.
Capital gain: the amount you make in profit when you sell an asset for more than you paid for it. Also known as Capital Growth.
Capital guaranteed: an investment where your money is guaranteed, usually by a bank, government body or life insurance company.
Capitalising (or capitalised) interest: where interest owed is accrued and added to the total debt rather than being paid on a regular basis.
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Car Buying Service: A car broker business that will act on your behalf to get you a great new car discount, fleet discount, general or private fleet discount on all new cars.
Car Loan: Finance or a loan for a motor vehicle.
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Car Finance: Cheap car finance at low rates. Use our car finance calculator to work out the monthly repayment.
Car Manufacturer: Company that produces and makes the different types of models of vehicles. ie. Audi, Alfa Romeo, Aston Martin, Bentley, BMW, Chrysler, Citroen. Daihatsu, Ferrari, Fiat, Ford, holden, HSV, Honda, Hyundai, Jaguar, Jeep, Kia, Landrover, lexus, Lotus, Mazda, Mercedes, Mini, Mitsubishi, Nissan, Peugeot, Porsche, Renault, Rover, Saab, Subaru, Suzuki, toyota, Volvo, VW
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Car Discount: A price paid on a new car that is lower than RRP, ACL can help you get a car discount on all new cars.
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Cashflow: The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.
Chattel mortgage: An alternative option for businesss with immediate ownership with the benefit of claiming back the GST within the BAS period of purchase. Again, repayments can be structured to suit your cash flow with balloon or lump sum payments at the end of the term.
Collateral: The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.
Commercial Hire Purchase, CHP: is a car loan where the customer can obtain goods by hiring them over the repayment term with a transfer of title to the customer on payment of the last rental. In most states a CHP can be 100% finance or with an optional deposit. Repayments can be structured and can be payable in advance or arrears. Also known as a HP, Hire purchase, corporate hire purchase, term purchase.
Cash: money in the form of notes and coins.
Chattels: personal property. Real chattels are buildings and fixtures, personal chattels are clothes and furniture.
Cheque: a written direction from one person (the drawer) to a bank to pay a sum of money to the person or organisation named on the cheque (the payee). If crossed 'Not Negotiable', the cheque can only be deposited into the bank account of the person named on the cheque.
Cheque account: an account which offers access to your money by writing cheques. If you do not have enough money in your account the cheque may not be paid and you may be charged fees.
Cleared funds: the amount of money in an account that is available for you to access. Cheques deposited into your account may take up to five working days to clear - until then they are called uncleared funds.
Co-borrower: an individual who borrows money jointly with you. Each individual is jointly and separately responsible for the repayment of the loan. Therefore, if one person does not pay the other person will be required to pay the full amount of the loan.
Collared rate: a variable rate with a fixed upper and lower limit.
Commission: an incentive-based reward or sum of money paid to a salesperson.
Comparison rate: helps you identify the true cost of a loan. It takes into account the interest rate, loan set-up costs, the term of the loan, and any other up-front or ongoing fees associated with a loan.
Consideration: generally means any payment made in return for a supply. Consideration also includes an agreement to do or not do something in relation to a supply of goods or services.
Consumer: an individual who buys or uses products or services.
Contract: a legally enforceable agreement.
Contract of sale: outlines the terms and conditions for the purchase or sale of a property.
Credit: money that a lender gives a borrower based upon a promise to pay it back in the future. A person taking either secured or unsecured credit usually has to pay interest on the borrowed money plus fees and charges in addition to the principal payment.
Credit file: a file that is kept by a credit agency (such as Veda Credit Advantage) which shows your credit history. If you have failed to meet your repayment obligations in the past and defaulted on a loan or credit card, your credit file may show a 'default'. Defaults may make it difficult for you to borrow money from some lenders.
Credit limit: the maximum amount that a bank will lend you for a loan or a credit card.
Credit rating: a 'credit rating' is a popular misconception. Rather than a rating, an individual's credit file shows their credit history including any defaults. Depending on a lender's finance approval criteria, one or more defaults may result in refusal to lend money.
Credit report: a report by an authorised credit reporting agency which details your credit history. A lender needs permission from you to obtain a credit report. Also known as a Credit Reference.
Credit union: a co-operative organisation that provides loans to its members.
Creditor: someone who is owed money. The opposite to debtor.
Creditor (Secured): a creditor who holds an asset belonging to the borrower/debtor as security for the repayment of a loan.
Creditor (Unsecured): a creditor who has provided a loan to a debtor and there is no security, such as a bank providing a credit card.
Date of issue: the date a bill or account was created.
Debenture: a type of fixed interest security, issued in return for medium and long term investment of funds.
Debit: most commonly a withdrawal from a bank account.
Debt: an obligation by an individual or organisation to pay a specific amount of money to another individual or organisation.
Debt to equity ratio: the amount of the loan compared to the value of the property or asset purchased, expressed as a percentage. Also known as Loan to Value Ratio (LVR).
Debtor: someone who owes money. The opposite of creditor.
Default: occurs when a person fails to meet the terms or requirements of a signed contract, such as not making scheduled repayments on a loan.
Default rate: the interest rate used when payments are not made or the facility goes above its limit.
Deposit: money that is used to secure the purchase of an item or an amount of money put into a bank account.
Depreciation: the writing-down of the cost of an asset over its estimated life.
Direct debit: an electronic payment that is made directly from a bank account, usually at a specified time on a pre-requested date.
Drawdown: occurs when the approved loan funds are provided by a lender.
EFTPOS (Electronic Funds Transfer at Point of Sale): a facility that lets you use your ATM card (debit card) to purchase goods, pay for services and withdraw cash at participating establishments.
Encumbrance: an outstanding liability or charge on a property.
End loan: the loan amount left after you sell your existing home and pay the proceeds towards your bridging loan.
Equity: the difference between an asset's current market value and any debt or claim against it, i.e. the value of an investment less any loan amount outstanding.
ERIC: Effective Rate of Interest plus Costs.
Expenses: your everyday expenditure, such as food, transport, housing, clothing and entertainment.
Finance company: provides loans to customers, usually at higher interest rates than banks, building societies and credit unions.
Flat Rate: The monthly interest rate charged. Watch out for flat rates being quoted instead of APRs: the flat rate is not the true cost of the loan and its usually around half the APR so it sounds cheaper.
Finance Charge: The total dollar amount credit will cost.
Fixed rate: The interest rate charged and/or the monthly payments are fixed throughout the length of the agreement.
Fleet Discount: A type of discount on a new car purchase, this is given depending on how many vehicles a company may have. Advance Car Loans can provide clients with all new car discounts.
Fully Maintained Novated Lease: A fully maintained novated lease is where all the running costs of the vehicle are covered, such as car-insurance, vehicle registration, fuel, tyres and servicing. In this instance you pay a regular monthly payment, and the leasing company covers all maintenance expenses.
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Financial Services Guide: provides you with information to assist you in making an informed decision on whether you want to use the products or services of a financial services provider.
Fixed interest: an interest rate that is set for an agreed term.
Fixed term deposit: money placed with a bank or other financial institution for a fixed period at a pre-agreed rate of interest.
Fixed term loan: a loan that you must repay within a certain time.
Garnisheea: court order to divert someone's money or property to someone else, either wholly or partly.
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Gearing: the ratio of your own money versus borrowed money in an investment. A 'highly geared' property has a high ratio of borrowed funds to owner's funds.
Government charges: these vary for each state and territory and include stamp duty, transfer of land and mortgage registration fees.
GST (Goods and Services Tax): a tax levied on the supply of goods and services.
Guarantor: a party who has legally agreed to be responsible for the payment of another party's debts.
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Income: the total amount of money you earn, including wages, rental income, interest and government allowances. For a business or a company, income is revenue less expenses.
Input tax credit: when you pay GST on taxable supplies for use in your business, you can usually claim these amounts back from the ATO.
Input taxed supplies: supplies which do not have any GST charged on them. The supplier is not entitled to input tax credits on these acquisitions.
Interest: the amount a lender charges a borrower for the use of the lender's money, or the amount earned through depositing funds with a financial institution in an interest bearing facility.
Interest adjustment: an adjustment sometimes made by banks or other financial institutions, which arises when a customer seeks to break a fixed term contract (either for a loan or a term deposit).
Interest in advance: when interest is charged at the beginning of a period of time. Generally only available for investment purposes on fixed rate loans.
Invoice: a bill that needs to be paid for products or services received.
Joint debt: when two or more people borrow money or incur a debt together. Unless the contract limits the amount each party must pay, the lender can recover payment of the whole amount from either party.
Legal entity: an individual or organisation that has the capacity to be held legally accountable such as an individual person, a corporate body or an incorporated body.
Loan: money that is lent to a person for an agreed term. At the end of the term the money must be repaid, usually with added interest.
Loan agreement: a formal contract between a borrower and a lender which sets out the terms and conditions of the loan. Also known as a Facility Agreement.
Low documentation loan: a loan generally for self-employed people who may not have the financial documents normally required to obtain a loan.
Lump sum payment: a single, usually large payment towards a loan in addition to your regular scheduled repayments.
Margin: the difference between the lender's interest indicator rate and the rate the borrower pays.
Minimum repayment: the minimum amount required to be paid on an invoice or a loan.
Mutual fund: a professionally managed pool of money contributed by a group of individuals and invested in a range of securities.
Net amount payable or refundable: calculated at the end of each tax period by offsetting total input tax credits against the total GST payable.
Net worth: simply put, this is the value of your assets less how much you owe on them.
Novated lease: an agreement where an employer agrees to meet the repayments of a lease while the employee remains employed, such as a car lease. The employee then sacrifices part of their salary to cover the cost of the finance.
Offshore account opening: the process of opening a bank account from outside Australia.
Option to buy: a legally binding document giving someone the right to buy something - usually within a specific period - at a specific price.
Operating Lease: Off balance sheet leasing option, where future residual asset risk remains with the finance provider. The product offers competitively priced passenger and light commercial vehicle leases tailored to match vehicle usage. Optional Full Maintenance and Service add-on products can be included.
Original documents: paperwork or documents that display original signatures and have not been reproduced, i.e. not photocopied or faxed.
Overdue: an amount of money that has not been paid by the due date and is still outstanding.
P.A. (Per Annum): for the year. For example, if the interest rate on a term deposit is 6% p.a., the depositor will be paid 6% in interest on the outstanding balance each year.
PAYG (Pay As You Go): a system for reporting and withholding amounts of money for income tax purposes. If you have employees, you're required to withhold tax from payments you make to them.
Personal loan: a type of loan that is used for purchases like a car, boat or a holiday. Money is lent to you for a fixed period, at a variable or fixed rate of interest and repayments are calculated at the start of the loan.
Positive gearing: occurs when you borrow to invest in something that makes more money than it costs you in interest and fees.
PP (Periodical Payment): a series of payments from an account made weekly, fortnightly, monthly, quarterly or annually.
Pre-approval: a process which provides an initial estimate of how much can be borrowed based on information supplied to the bank. Also known as Approval in Principle.
Prepayment: additional payment(s) made under a loan that are over and above the payments specified under the loan contract.
Principal: the amount of capital deposited or borrowed, upon which interest is paid or charged.
Principal and interest loan: a loan where the principal and the interest are repaid together for the term of the loan.
Private sale: a property sold directly by the owners, not through an estate agent.
Quarter: a period of three months. A business should submit a Business Activity Statement every quarter, for example.
Receipt: a record showing that a payment has been received or an invoice has been paid. They usually have a reference number and detail the amount of tax that is included in the payment. See Invoice.
Records: financial documents and paperwork.
Redraw facility: allows access to additional repayments made on a loan.
Reducible interest: loan interest that is calculated on the principal owed each day. You pay less interest as the principal amount decreases.
Refinancing: replacing or adding to an existing mortgage to obtain a lower interest rate, consolidate debts or lengthen maturities etc.
Registered entity: an entity that is registered for GST.
Render: to present a bill or invoice for payment.
Repayment: money paid by a borrower to a lender. Principal and interest repayments include both the interest due and a component of the principal amount borrowed.
Repossession: occurs when a borrower cannot repay a loan and the lender takes possession of any assets or investments that have been provided as security.
Risk: exposure to the chance of loss when investing over time. Lower risks are normally associated with lower returns.
Risk grade: calculated by a bank to assess how secure a loan or investment is likely to be. The higher the risk grade, the higher the annual percentage rate that is likely to be charged by the bank.
Risk profile: the amount of risk you are prepared to take for the prospect of earning a higher return.
Savings account: a day-to-day bank account which provides easy access to your savings.
Scammer: a person or an organisation that aims to cheat consumers.
Security an asset: usually the property purchased with the loan funds - that can be sold by a lender if the debt is not repaid in full.
Servicing: meeting principal, interest and other payments on a loan.
Settlement date: the date when the new owner makes a final payment and takes possession of a property.
Split Loan: where various loans are used to fund the same property. May have a portion variable, fixed or even a portion as a line of credit.
Stamp Duty: a Government charge on certain financial transactions. For example, stamp duty is payable by the buyer on a transfer of land when a property is sold. The amount varies for each state and territory.
Salary Packaging: Salary Packaging is an Australian Taxation Office approved means of allowing your employees to effectively restructure their income. Employees can choose to receive their salary as a combination of cash and approved benefits. These benefits are either tax free or taxed at concessional rates. Replacing some of their cash salary with benefits enables employees to lower their taxable income to increase their take home pay.
Secured Car Loan: This facility can be structured with a balloon payment and the term is usually three to five years. The loan is secured by the vehicle.
Statement: a written record which summarises all the transactions that have occurred on your account, including fees charged and interest paid.
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Tax audit: an examination of your tax affairs by the Australian Taxation Office to ensure you have adhered to tax laws.
Tax File Number (TFN): a nine digit number issued by the Australian Taxation Office to Australian residents and registered companies to identify them for taxation purposes.
Tax invoice: a document issued by a supplier showing a price and the amount of GST (if any). It must include the supplier's ABN.
Tax period: an accounting period of one or three months (depending on annual turnover) which applies to GST and Business Activity Statements. Quarterly tax periods end on 31 March, 30 June, 30 September and 31 December. Monthly tax periods end on the final day of each month.
Term: a period of time, such as the time in which a loan must be repaid.
Terms and conditions: details which outline specific obligations of each party with regards to a contract, transaction or product.
Transactions: movements of money, such as deposits, withdrawals or transferring between bank accounts.
Transfer: a document confirming a change of ownership as noted on the Certificate of Title then registered with the Land Titles Office.
Transfer: to move money from one bank account to another.
Trust: an entity created to hold assets for the benefit of certain individuals or groups and managed by a trustee.
Trust account: an account usually used by professionals such as lawyers, accountants and stockbrokers to manage their clients' money.
Unconscionable conduct: behaviour considered to be unreasonably excessive, unfair or unjust.
Unsecured loan: a loan given by the lender on an unsecured basis, such as a credit card.
Value: in a GST context, value is the price excluding GST.
Vendor statement: a list of their property's material particulars, made by the seller for the buyer.
Verification of Employment: Written verification of your employment. Sent by your current employer, this may include your salary information, and your job description.
Yield: the annual return on an investment, expressed as a percentage.
Zoning: local authority guidelines which stipulate how land should be used.

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Car Finance Glossary