Car Loans Glossary

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P

• P11D

  The P11D value is the value of the tax you have to pay on a company car from your salary. Benefit in kind is the same thing as your P11D value. It is calculated by the list price of the car, delivery charges, car accessories, and C02 emissions amongst other things.

• Part Exchange

  Part exchange is the term used when you put your own car down as a payment towards a more expensive car you want to buy. Sometimes a dealer can give you very reasonable (perhaps even generous) terms on a part exchange deal on a new car because their desire to sell their car and meet their quotas is so strong. This means that if you do want to do a part exchange deal it is smart to shop around.

• Payment Protection Insurance

  Payment Protection Insurance is taken out at the same time as a loan and it makes sure that if you fall ill or have an accident (or similar circumstances which leave you without income through no fault of your own), and are unable to keep up your repayments, they will be paid for you. Some finance lenders insist that you take out payment protection insurance at the same time as they take your loan. It is generally not that expensive so, unless your finances are secure and ship-shape, we would suggest that you take out payment protection insurance to be on the safe side.

• Personal Car Leasing

  Personal Car Leasing was developed after alterations in the laws on VAT. Essentially you only make monthly payments for the part of the car that you use and at the end of the contract you return the car without any further obligations. The attraction of personal car leasing is that it simplifies the contract, and you pay less since you are not building up to a final payment to own the car. You have the option to pay the remainder to own the car, just as in a personal contract purchase.

• Personal Contract Purchase

  If you have a personal contract purchase deal, the option to purchase fee is the amount you would have to pay (as well as the minimum guaranteed future value) to keep the car when the contract period is up. Not all personal contract purchases will have an option to purchase fee, so make sure you know all the requirements of the PCP.

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• Residual Risk

  Residual risk refers to the likelihood that your vehicle will not fetch as much money as you hoped when you sell it in the future. Residual risk can devolve onto either the dealer or the buyer depending on the form of the contract.

• Residual Value

  The phrase residual value is used to describe how much your used car is worth. All cars have different depreciation rates and therefore some lose their value quicker than others. The residual value of your car may not matter so much if you intend to keep it for some while, whereas it becomes more important if you intend to sell it on within two or three years, say.