Buying a Car: Key Terms and Definitions explained
Ok, so we’ve got the guide to buying a car all sorted – you know what to do and when, but let’s narrow in on the process a little more and look at some of the baffling terms you might come across when you’re out looking for the car or for finance.
Working with the team at People’s Choice Credit Union, we’ve combined the words and terms we see in cars with their knowledge of finance to build you a solid list of terms and phrases as well as some of the abbreviations you might come across when buying a car or looking for a personal loan.
Car Related Terms
- Power (kW) – The more power you’ve got, the faster the engine can run and therefore the more power you’ve got to put to the ground. Of course, two cars could have the same power but be very different in size, so power alone doesn’t equal speed
- Torque (Nm) – We could talk about foot-pounds of turning force and a whole bunch of mathematical equations, but in the end for car buyers, Torque normally relates to the ability to accelerate. The more torque, the better the car’s ability to put the power down
- Displacement (cc) – This is the size of your engine. Simple as that!
- Wheelbase – The distance between the front and rear wheelsESC – Electronic Stability Control is the computerised system which prevents your car going out of control by managing the traction and spin of individual wheels.
- ABS – Anti-Lock Braking System is now a common and thankfully standard feature of vehicles today. Put simply it stops your brakes locking if you slam on the brake pedal. This ensures you continue to get some traction while still slowing, particularly in wet conditions, but that same traction also allows you to continue to steer a car under extreme braking
- TCS – Traction Control System is another name for Electronic Stability Control (ESC) however it should be noted that in some cars TCS simply prevents your wheels from spinning, while ESC can and will go further to control the vehicle
- BA (EBA) – Emergency Brake Assistance is an additional braking mechanism that will apply greater pressure on the brakes than the human foot could do when under emergency braking conditions. When paired with ABS this means even shorter stopping distances while still not losing control
- HSA – Hill Start Assist, a great modern feature which helps you stop rolling back when moving from a standstill when on an incline. If you’re at a set of lights and the road is inclined you might roll back as you release the brake to accelerate. With HAS the car will hold its place (for a short moment) while you get the car moving
- DCS – Decent Control System, most commonly found in off-road or 4WD vehicles, also known as Hill Decent Control this smart computer will help keep the car from rolling too fast down a hill when taking on a tricky decent
- Dual-Zone Climate Control – If your passenger wants the air conditioning at one temperature and you want it at another – look for Dual-Zone Climate Control in your car
- LCD – Liquid Crystal Display is the technology used in flat screens and touch screens today, in cars this will most commonly describe the in-car entertainment system screens, the rear seat screens or even the dashboard instruments
- LED – Light Emitting Diodes are becoming a common feature in car lighting, not just on the inside, but on headlight accents also – if you’ve seen those “glowing lines” around the headlights of many modern cars that’s likely a set of LED lights
Finance Related Terms
- TAP – “To approved purchasers” – in other words, the finance rate listed is available, but only if you actually qualify for finance!
- LVR – This is your loan to value ratio; the value of your car (or house) compared to the amount you are borrowing and is calculated by loan amount divided by the security value (the value of your car/house) x 100 and given as a percentage
- Liability – Your loan
- Equity – The amount that you have paid off on the liability – the more you pay, the more equity you have
- Redraw – The extra funds that you’ve paid off your loan available for you to access through your loan’s redraw facility. Generally not available for fixed interest loans
- Variable – The interest rate can change over the term of the loan
- Fixed – The interest rate is fixed for a set period
- Per annum – Each year, often abbreviated as p.a.
- Monthly fee – A fee charged each month on the loan by some lenders
- Application Fee – The fee you pay when you take out a loan
- Arrears – Missed loan repayments
- VEDA – A credit reference company where lenders request and obtain information on your credit history
- Security –The asset that is held until the debt is paid off. It can be retained and sold by the lenders if the debt is not paid
- PPSR – Personal Properties Security Register – A national register where financial institutions record their interest in a personal asset, usually a car
- Goods Security Agreement – The legal document used to take security over your vehicle
- Contract – The legal document you sign when you borrow money
- Stamp Duty – A government fee you pay on certain documents
- Registration – This can relate to car registration; a fee you pay to the government to legally drive your car on the road, this also covers you for the a personal injury insurance component if there was a car accident and bodily injury was sustained
- Insurance – can relate to car insurance; with a car loan you would need to take out comprehensive insurance which covers your property and any other property in the event of accident or injury
- Certificate of Currency – This is evidence from your car insurer that you have your car insured and that the financial institution is noted as financier
This post is written in collaboration with People’s Choice Credit Union.