Car retailers will need to work harder to explain the jargon of automotive finance after a survey revealed just one-in-10 of car buyers understand common industry terminology.
According to the results of a study by Admiral Car Finance one third of consumers think that “balloon payment” is a made up term, and one-in-nine think that PCP is a type of sexually-transmitted disease.
Almost 2,500 people were polled, and the study questioned respondents on their knowledge of car finance terminology.
Participants were asked to choose the best definition for a number of terms when given three possible options, but were unaware of the purpose of the study.
The first car finance term respondents were presented with was ‘HP’, to which just one third (32%) were able to correctly identify it as ‘hire purchase’ whilst the remaining 68% were unable to guess correctly.
As many as 24% of respondents incorrectly identified PCH as an hallucinogenic drug, whilst 42% thought that it meant ‘private car hire’.
Just 20% correctly identified it as ‘Personal Contract Hire’, and the remaining 15% thought it was a made-up term.
When presented with the term ‘balloon payment’, 34% stated that they thought it was made up.
Just 27% were able to correctly identify that the phrase refers to the final lump sum paid at the end of a contract.
Scott Cargill, the chief executive of Admiral Financial Services Ltd, which operates Admiral Car Finance, said: “Taking out car finance can feel intimidating and stressful as a lot of the wording and acronyms used are unfamiliar to many Brits.
“It’s important that car buyers fully understand the car finance products they’re taking out.
“47% of respondents also said that they got frustrated when companies use acronyms when describing products, we wanted to raise awareness of the confusion and hope to inform more people on what the terms stand for.”
Some of the other most commonly misinterpreted phrases relating to buying a car on finance and what Brits believed they meant were:
• MSRP (Manufacturer’s Suggested Retail Price) – a food additive (32%)
• GFV (Guaranteed Future Value) – gluten free vegans (23%)
• PCP (Personal Contract Purchase) – a sexually transmitted disease (11%)
• APR (Annual Percentage Rate) – London-based football club (6%)