Demystifying the acronyms and jargon around car finance.  

Navigating the world of car finance can seem daunting, especially given the abundance of car finance jargon and terms commonly used in the automobile industry.  

Fortunately, our latest blog post is designed to provide a clear guide to understanding the various car finance acronyms and terminologies so that you can make informed decisions and choose the most suitable car finance option for you.  

Car Finance Acronyms breakdown

A –    

ACF – Auto Credit Finance: ACF is a financial service or institution that offers credit facilities specifically designed to buy automobiles. 
   

ACHP – Assured Consumer Hire Purchase: ACHP, also known as Assured Consumer Hire Purchase, is a specific type of hire purchase agreement that provides the consumer with assurances and guarantees regarding the agreement’s terms.  

AF – Acceptance Fee: Some lenders may require an acceptance fee for administrative duties. While not all lenders impose this fee, those that do may either include it in the monthly payments or add it to the beginning of the finance agreement.
   

AFP – Advanced Finance Package: AFP usually describes a complete financial solution offered by lenders or financial institutions to make buying a vehicle easier. 
   

AFR – Additional Finance Required: AFR typically refers to the amount needed beyond what is currently available or allocated to complete a transaction, often in the context of purchasing a vehicle. 
   

AGL – Agreed Guaranteed Loss: AGL commonly refers to a prearranged sum that the purchaser mutually agrees upon with the lender in specific car financing arrangements, like personal contract purchase (PCP) or lease agreements. 

   

AGP—Additional Guaranteed Payment: AGP is commonly used to describe an additional amount mutually agreed upon by the buyer and the lender in specific car finance agreements, such as hire purchase (HP) or personal contract purchase (PCP). 
   

APR – Annual Percentage Rate: APR is a widely accepted metric representing the annual interest rate applied to loans or credit agreements, such as car financing, mortgages, personal loans, and credit cards. 
   

ASL – Advanced Settlement Loan: An “Advanced Settlement Loan” usually involves receiving an upfront payment or loan in exchange for giving up a future settlement or financial claim. 


B –    

BFL – Balloon Finance Lease: In a “Balloon Finance Lease,” the person or company leasing the vehicle (known as the lessee) pays smaller monthly instalments during the lease period. However, a larger “balloon” payment must be made at the end of the lease. 
   

BFV – Balloon Finance Value: BFV usually indicates the agreed-upon residual value of a car after a finance contract, especially in setups like balloon finance or balloon payment schemes. 

BP – Balloon Payment: A “balloon payment” is a substantial payment that must be made at the end of a loan term. This payment is usually required in a financing arrangement called a balloon loan.  

 
 
C –   

CDP – Contractual Deposit Payment: CDP is the amount of money a buyer commits to paying to secure a purchase as per the contract’s terms. 
   

CFA – Consumer Finance Association: The CFA is an organisation in the United Kingdom that represents short-term lending enterprises. These enterprises offer a range of short-term credit options, such as payday loans, instalment loans, and other types of high-cost credit. 
   

CFC – Car Finance Company: A car finance company is a financial institution or entity that offers loans or financing alternatives exclusively to acquire automobiles. 
   

CFP – Car Finance Plan: A CFP stands for a financial deal people utilise to buy a car, usually through financing choices provided by banks, credit unions, finance firms, or car dealership finance departments. 
   

CHP – Consumer Hire Purchase: Consumer hire purchase, often used by individuals to acquire expensive consumer goods, is a popular financing arrangement. 
   

CHP – Contract Hire Purchase: CHP is a vehicle financing arrangement that combines leasing and hire purchase elements. 
   

CPV – Contract Payment Value: CPV usually refers to the total sum of money that one party must pay according to the terms of a contract.  

D –   

DCF – Direct Consumer Finance: DCF is a financial service in which financial institutions or lenders directly offer funding or credit to consumers. This type of service helps consumers with different needs like buying goods, managing expenses, or consolidating debts.  

DMP – Debt Management Plan: DMP is a well-organized strategy that aims to assist individuals in effectively managing their debts. It involves negotiating with creditors to potentially lower interest rates or reduce monthly payments.  

 
F –   

FSA – Financial Services Authority: The FSA was a regulatory authority in the UK that supervised the financial services sector from 2001 to 2013. It was established under the Financial Services and Markets Act 2000 to simplify and unify financial services regulation in the country.   

 
G –   

GAP – Guaranteed Asset Protection: Gap insurance is specifically created to protect you from the financial gap that may arise if your car is stolen or declared a total loss by your insurance company. It covers the difference between the amount your insurer pays and the original price you paid for your vehicle.  

GMFV – Guaranteed Minimum Future Value: GMFV is an acronym used in Personal Contract Purchase (PCP) agreements. It represents the minimum value that the vehicle will retain after the PCP agreement, subject to specific conditions being met. 

 
H –  

HP – Hire Purchase: HP finance allows you to lease a car by making monthly payments that include the cost of the vehicle and interest. Ownership is transferred to you only after the final payment is completed.
 

HPI – Hire Purchase Investigation: The HPI check provides a comprehensive vehicle history report and is widely utilised by drivers, dealers, and mechanics in the UK for cars, vans, and motorbikes.  

I –  

IVA – Individual Voluntary Agreement – An IVA is a formal agreement with creditors to repay some or all your debts gradually. You will pay a professional monthly to distribute the funds to your creditors.  

K –
KYC – Know your customer: KYC, which stands for Know Your Customer or Know Your Client, is the essential procedure of confirming and validating a client’s identity during account opening and at regular intervals thereafter.

L –    

LPP – Lease Purchase Plan: A Lease Purchase Plan, often referred to as a Lease with Option to Purchase or Rent-to-Own, is a financial agreement that enables individuals or businesses to obtain assets by utilising a mix of leasing and buying. 

LTP – Loan to Purchase: “LTP” commonly refers to a financial agreement in which an individual or company obtains funds from a lender to purchase an asset.


LTV – Loan to Value: The loan to value ratio, also known as LTV, represents the percentage of the home’s value that you will need to borrow in order to purchase it. 

M –   

MPV – Monthly Payment Value: The term “Monthly Payment Value” usually denotes the sum of money that an individual or business needs to pay every month as a part of their financial commitment, such as a loan, lease, or subscription service.  

MOT—Ministry of Transport: An MOT is a yearly examination to ensure a vehicle’s safety. By law, all vehicles older than three years must possess a valid MOT certificate to prove their roadworthiness.  

P –   

PA – Per Annum: Per Annum refers to something that occurs or is calculated yearly. In car finance, it is commonly used with interest rates or repayment amounts.  

PCP – Personal Contract Plan:  A Personal Contract Plan (PCP) is a popular form of car finance in the UK. It’s a type of hire purchase agreement that allows you to finance a new or used car over a fixed period, typically two to four years. 

R –   

RFS – Retail Finance Solutions: RFS includes various financial products and services created to make retail transactions easier, especially when consumers buy goods or services.  

ROT – Rate of Interest: The interest rate is the percentage a lender charges for borrowing money. 

T –   

TCF – Treating Customers Fairly: TCF is a regulatory initiative to ensure that financial services firms prioritise the fair treatment of their customers.  

V –   

VAF – Vehicle Asset Finance: VAF, also referred to as asset finance or vehicle financing, is a financing technique employed by individuals or businesses to obtain vehicles without the need to make the complete payment upfront.  

VAP – Vehicle Acquisition Plan: Planning to acquire a vehicle? Look no further than a Vehicle Acquisition Plan! This well-structured approach helps you acquire vehicles for personal or business use.  

We hope this article covered majority of the car finance acronyms you need to know but, if you are still searching for more information on car finance, we recommend checking out our comprehensive car finance guide, which provides detailed insights on various aspects of car financing, such as types of loans, credit scores, and more.  

The guide is designed to help you make informed decisions and feel more confident with car finance acronyms often used so you can choose the best option that suits your needs and budget.