Glossary

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ŠKODA Financial Services Home

Take the mystery out of car finance with this handy guide to commonly used terms.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Amortisation

This is where a number of instalments are used to pay off a debt, and each payment decreases the loan principal and also covers the interest. 

Asset & Liability Statement (A&L)

A statement outlining:

  • All your assets - e.g. property, vehicles, shares and loans.
  • All your secured and unsecured liabilities - e.g. loans, credit card debt, mortgage.
  • Your Net Asset Position - the balance of the total value of your assets, minus your total liabilities. 

B

Balloon Payment (see also Residual)

This is a final lump sum due at the end of a finance agreement or loan. It’s decided at the beginning of the agreement and will be included in the contract schedule.

C

Capitalised Interest

Interest not paid, but added to the outstanding debt. You’ll also need to pay interest on the increased balance.

Consumer Loan

When you own the vehicle and make regular repayments to ŠKODA Financial Services. This loan is for people who use their vehicle mostly for personal purposes.

Chattel Mortgage

When you own the vehicle and make regular repayments to ŠKODA Financial Services. You can only get this finance if you use your vehicle for business purposes.

D

Depreciation

The reduction of an asset’s value over its lifetime.

F

Financials

When you apply for finance, if we ask for your financials we mean information such as:

  • Asset & Liability Statement (A&L)
  • Balance Sheet
  • Profit & Loss Statement (P&L)
  • Tax Returns.
Fringe Benefits Tax (FBT)

A tax on the extra benefits, such as a vehicle, provided to employees by their employer as a part of their salary package.

Fringe benefits can potentially help employees reduce their income tax by reducing the dollar amount of their salary. Although the employer is responsible for actually paying the FBT, most will recover it from the employee through the salary packaging arrangement. 

To find out more, talk to your HR department and your accountant.

H

Hire Purchase (HP)

When ŠKODA Financial Services owns the vehicle and you buy it from us over time with regular repayments. Once you’ve have made your final repayment, you own it. You can only get this type of finance if you use your vehicle for business purposes.

J

Joint & Several Guarantee

This means that guarantors are jointly and personally liable for the whole debt.

L

Limited Guarantee

The agreed limit of finance that a guarantor is responsible for.

Loan Value Ratio (LVR)

Ratio of the loan amount to the value of the vehicle.

N

Nominal Interest Rate

The rate displayed on the documentation and agreement. It generally does not take inflation into account.

Novated Lease

A lease agreement between you and ŠKODA Financial Services that your employer agrees to pay on your behalf. If you leave your employment the lease terminates and you become responsible for making the repayments. There may be tax benefits for you, if your employer pays the lease repayments. 

NPV (Net Present Value)

Today’s value of a future amount, before interest is earned or charged.

P

Personal Property Security Register (PPSR)

A central register where ŠKODA Financial Services records its security interest against all vehicles we finance. The PPSR replaced REVS and other security registers in January 2012.

Principal

The amount of money you’ve borrowed.

Principal & Interest (P&I)

Repayments that cover the interest charge and reduce the principal.

R

Residual (see also Balloon)

The final balance due at the end of a loan or finance agreement. This amount is worked out at the beginning of the loan and included in the loan agreement and calculation schedule.

S

Stamp Duty

This is a state government tax for finance contracts, but from 30 June 2012, New South Wales is the only state to apply it to goods mortgages, which include automotive contracts.

Structured Finance

Payments on your finance agreement does not fit a regular monthly payment schedule for the whole term. E.g. one payment is made in the first month, then none for six months and then regular monthly payments for the rest of the term. Structured asset finance may offer you tax savings and assist with managing your cash flow. 

U

Unsecured Debt

A debt that does not use collateral such as a house or car for security.