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Car Finance Glossary Definitions for some of the most common terms and words used in the car finance industry. An interest rate that attempts to reflect the true cost of a loan, including fees and charges. Annual Percentage Rate is sometimes mis-used by Australian companies - the Australian equivilent is Comparison Rate. Acronym or short for Annual Percentage Rate. See Annual Percentage Rate. Australian Securities and Investments Commision (http://www.asic.gov.au/asic/asic.nsf) Term used to refer to the goods you are purchasing Car, Bike, Truck, Boat, Caravan, Plant and Machinery Asset Lease See Finance Lease. Australian Tax Office (http://www.ato.gov.au/) Refer to Residual Value. Refer to Vehicle Finance. Refer to Finance Lease. A personal finance product where the financier lends the customer funds for the purchase of a car or other asset like bike, boat caravan, and the secures the loan against that vehicle. Related reading: Car Loan A commercial car finance product under which the customer takes ownership of the vehicle at the time of purchase, and the financier takes out a mortgage over the vehicle (chattel) as security. Related reading: Chattel Mortgage Acronym or short for Commercial Hire Purchase. See Commercial Hire Purchase A commercial finance product where the customer hires a car or commercial vehicle from the financier for a fixed monthly repayment over a set period of time. Related reading: Commercial Hire Purchase A comparison rate is a tool to help consumers identify the true cost of a loan, including the interest rate and the total of fees, charges and additional insurance products relating to a loan. In Australia the term Comparison Rate is defined under law in the Consumer Credit Code, and includes the amount of the loan, the term of the loan, the repayment frequency, the interest rate and all fees and charges except government charges (such as stamp duty), fees which may or may not be charged (such as early payout fees) and fees not ascertainable at the time the comparison rate is provided. Refer to Car Loan The maximum asset value that is allowed by the Australian Tax Office when depreciating a motor vehicle. For the 2009-2010 financial year, this value stands at $57,180.00. The ATO (http://www.ato.gov.au/) renew and review this amount annualy A fixed dollar fee applied by some lenders if you payout (end) a vehicle finance contract early. This amount varied depending on the actual lender and the type of finance you secure.. An interest rate that attemps to reflect the true cost of a loan, including all fees & charges. When CM Financial refer to an effective interest rate in an example loan scenario, it is calculated by the same formula used for a Comparison Rate A general term when talking about borrowing money for the purchase of an asset. A commercial car finance product under which the financier purchases the vehicle on the customer's behalf, and then leases it back to them for a specified period of time. Related reading: Finance Lease Acronym or short for for Hire Purchase.See Commercial Hire Purchase. The amount of interest charged on a loan, normally expressed as a percentage per annum. Acronym or short for for Luxury Car Tax. See Luxury Car Tax. A tax paid on new passenger vehicles whose sale price exceeds the Luxury Car Tax Threshold. Luxury Car Tax is calculated as 33% of the GST exclusive portion of the vehicle's purchase price over the Luxury Car Tax Threshold. Related reading: Luxury Car Tax Explained Refer to Luxury Car Tax Threshold. The minimum value (price) at which Luxury Car Tax must be paid on vehicles that meet the ATO Luxury Car Tax criteria. The Luxury Car Threshold is set at the same amount as the Depreciation Limit. For the 2009-2010 financial year, the threshold is $57,180.00. A method of salary packaging a car or other vehicle. An employee leases a car and the employer agrees to take on the employee's obligations under the lease, paying the monthly lease rentals from the employee's pre-tax income. Related reading: Novated Lease Refer Commercial Hire Purchase. Refer to Early Termination Fee. A monetary penalty for paying out (ending) a vehicle finance contract early. An unsecured loan, a personal finance product where the financier lends the customer funds which can be used to purchase any goods. The funder does not hold any security over the loan. Related reading: Personal Loan A lump sum owed to the financier at the end of a loan's term, expressed either as a dollar value or a percentage of the amount borrowed. A method of amortising interest across the payments made over the life of a loan, used by almost all Australia vehicle financiers for commercial car finance facilities. Under the Rule of 78, the interest component of payment n is equal to the number of remaining payments (including payment n) divided by the sum of the sequence of terms between 0 and the total number of payments, multipled by the total interest for the loan. For example, with a 3 year loan paid monthly, there are 36 monthly payments. Therefore, the amount of interest applied in month 7 is equal to 30 (remaining months including current) divided by 666 (sum of the sequence of terms between 0 and 36), multipled by the total interest to be paid over the term of the loan. The "78" in Rule of 78 comes from applying the above formula to a 1 year loan paid monthly, where the sum of the sequence of terms between 0 and 12 equals 78. Incorporating a vehicle in an employee's renuumeration package, normally by way of a Novated Lease, Operating Lease or company car. See Car Loan. Property - the vehicle in the case of car finance - that a financier can claim in case a borrower defaults on their loan obligation. . The length of a loan, normally expressed in months or years. See Personal Loan. A general term referring to borrowing money to purchase cars or other vehicles. Generally "car finance" (as opposed to "car loan") refers to commercial car finance, such as Car Lease (Finance Lease), Commercial Hire Purchase (CHP or HP), Chattel Mortgage and Novated Lease. See Finance Lease. Disclaimer: While CM Financial make every attempt to give you the best possible information, CM Financial, its agents, employees and accredited lenders will accept no responsibility for any loss that may arise. |
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