A guide to the common terms used in car dealerships | AA Cars

Going to a car dealership can be a daunting experience when you don’t know all the lingo.

Here, we decode some of the common phrases, acronyms and words you might hear on the forecourt – so you can confidently buy a car without being bamboozled by language.

Clocked/Clocking

Generally used cars are worth more if they’ve covered fewer miles. Clocking is the illegal practice of changing a vehicle’s ‘odometer’ to make it look as if the vehicle’s covered fewer miles than it really has.

Deposit contribution

Offered by the manufacturer to customers when buying a car, usually new, on finance. This sum is discounted from the overall finance package, whether it’s a hire purchase (HP) or personal contract plan (PCP). It’s only available when buying the vehicle through the manufacturer’s own finance service.

Depreciation

With the exception of a few classic and historical vehicles all cars lose value as they get older. Depreciation is the difference between what you pay for a car today and what it’s worth in a few years’ time when you sell it.

Ex-demo

When providing test drives for potential customers, dealerships use demonstrator vehicles. If sold on, these vehicles can be cheaper than similarly specced brand new models. Expect ex-demonstrators to have been well-maintained and have low mileage. The first owner of the vehicle will be listed as the dealership in the V5 logbook.

Full service history

If a used vehicle has been looked after properly, it’ll have a full service history complete with a stamped service book in line with the manufacturer’s schedule. A full dealer service history is ideal, as it means that the vehicle has been maintained at the correct intervals as well as being serviced at a main dealer throughout its time on the road.

Want to buy a car from an AA-approved dealership? Check out our selection of used car dealerships

GAP Insurance

This is used to bridge the deficit between how much your insurance company will pay out for an incident and the balance left on your finance agreement to help with a replacement vehicle.

GMFV

The Guaranteed Minimum Future Value (GMFV) is the finance company’s estimate of what a car will be worth, taking account of depreciation, at the end of a PCP contract. It’s the amount you will have to pay if you want to ‘buy’ the car at the end of the PCP. This figure is calculated by the manufacturer and states what the car would be worth when the contract terminates, as long as the driver has maintained the vehicle and serviced it in line with the correct intervals, as well as sticking to the original mileage agreement.

Hire Purchase (HP)

HP is way of buying a car in instalments with the loan secured against the car.  You pay a deposit followed by monthly payments but don’t own the vehicle until you’ve made the final payment.

Leasing

Essentially a long-term rental plan, leasing requires an up-front deposit – which can be between 3 or 6 times more than a monthly payment – followed by monthly instalments. Those payments are, in effect, for the use of the vehicle. You hand the vehicle back at the end of the agreement and must make sure you look after it and keep within the set mileage figure.

Lemon

This is a term sometimes used to describe a car that seems beset with manufacturing defects and other problems.

Part-Ex or Part Exchange

When using your old vehicle as partial payment for a new one, this describes your current model.

Personal Contract Purchase (PCP)

Usually set over a 2 to 3-year period, this type of finance – like hire purchase and leasing – requires monthly instalments, but comes with an optional balloon payment, also called GMFV. You can choose to keep the vehicle at the end by paying the GMFV or, as long as you’ve stuck to the pre-agreed mileage and kept the car in good condition, you can hand the keys back and agree a new PCP deal.

Pre-Reg

A pre-registered vehicle is one that has been bought by the dealer and registered in their name, with the dealer named as the first keeper on the V5C registration document. By looking at pre-reg models, you can save a lot of money, but you won’t have access to as much selection in terms of colour, equipment and specifications. These are bought by the dealer to meet sales targets and earn bonuses from the manufacturer.

Residual Value

This is the amount a vehicle is worth following a period of depreciation. A vehicle is judged on whether it has good or bad residuals over 1, 2 or 3-year periods.

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