The Admiral Car Finance team has found that just one in 10 Brits are able to identify all the jargon used in car finance.
In a survey of 2,500 people only 32% correctly knew that HP stands for 'hire purchase', while 23% thought PCH was a hallucinogenic drug and 42% thought it stood for 'private car hire'. Just 20% correctly knew that it meant 'personal contract hire' and the remaining 15% thought it was made up.
When it comes to the term 'balloon payment', 34% thought it was made up and 9% believed it was the term used when hiring a clown. Just 27% were able to correctly identify that the phrase refers to the final lump sum paid at the end of a contract.
Some of the other most commonly misinterpreted phrases and what Brits believed they meant were:
We also took to the streets to see how much members of the public knew about car finance terms.
To try and clear up some of the confusion, here’s some of the common jargon used in car finance and what it means.
HP (hire purchase)
Hire the car by paying an initial deposit, followed by fixed monthly payments, with an 'option to purchase' fee at the end of the contract in order to own the car.
PCP (personal contract purchase)
Fixed monthly payments cover part of the value of a car, with an option to pay the remainder in a final payment to keep the car at the end of the contract (or you can hand it back). Mileage is pre-agreed.
PCH (personal contract hire)
This is a long-term lease agreement where you make monthly payments and return the car at the end of the contract. Mileage is pre-agreed.
APR (annual percentage rate)
APR is the term for the amount of interest you pay annually on a borrowed product like a loan or credit card.
MSRP (manufacturer's suggested retail price)
Also known as the suggested retail price, this is the price the manufacturer recommends the retailer sells the vehicle for.
The balloon payment is the final payment at the end of a personal contract purchase that allows you to buy and own the vehicle.
To find out more about some of the jargon used in car finance, read our guides:
09 Mar 2018
08 Aug 2018
16 Oct 2018