Add-ons
Products or services sold by dealerships that can be added on to the vehicle.
Some examples include rust-proofing, upholstery treatments, alarm systems,
and extended warranties. Remember that these add-ons will increase the
price of the vehicle, and your monthly payment.
Amortization
The reduction of debt by regular payments of principal and interest over
a period of time.
APR
Annual Percentage Rate. A way of expressing the cost of credit on a loan.
Under federal law, all consumer loans must disclose the Annual Percentage
Rate.
Application
The information you provide to us to see if we can offer you a loan.
Assets
Things you own.
Balance
The amount in an account or owed on a loan. The balance in a checking
account is the amount of money in that account. The balance on a loan
account is the amount remaining to be paid back.
Balloon Payment
A large payment due at the end of a loan. Using a balloon payment, the
individual monthly payments can be smaller.
Bankruptcy
A legal action, whether voluntary or involuntary, that generally is made
based on an inability to pay debts when due.
Base Price
The cost of a car without options. Also called the "sticker price"
or "MSRP."
Bill of Sale
A document that shows the details of a sale. Your dealership will prepare
a bill of sale to document your purchase.
Blue Book
A publication of Kelley Blue Book, Inc. and one of several standard references
used to determine the value of used vehicles. The value is sometimes called
the "Blue Book Value." Blue books typically show a wholesale
value and a retail value for each vehicle.
Captive Finance Company
A separate company owned by an auto manufacturer to finance product sales.
Examples include General Motors Acceptance Corporation (GMAC) and Ford
Motor Credit Corporation (FMCC).
Cash Flow
A measure that compares your income and your expenses.
Collateral
Property that you pledge to give up if you default on a loan.
Compound Interest
An interest method that calculates interest on interest earned in prior
periods.
Credit Bureau
A private company that collects information about consumers from public
records and reports from banks and other companies.
Credit Report
A report about an individual's payment history that is supplied by a Credit
Bureau.
Customer Incentive
A special payment from the manufacturer to the customer to promote sales
of slow-selling models. Also called a "Rebate".
Dealer Holdback
An allowance paid by the manufacturer to the dealer to allow the dealer
to purchase a vehicle for less than the invoice price.
Dealer Incentive
A special payment from the manufacturer to the dealer to help the dealer
sell slow-selling models.
Dealership
A company authorized by a manufacturer to sell that manufacturer's products.
Debt
An obligation resulting from borrowing money.
Depreciation
A reduction in the value of an asset. Most cars begin to depreciate the
moment they are sold. Some vehicles depreciate much faster than others.
Destination Charge
The fee charged by the manufacturer to ship the vehicle to the dealership.
This fee is passed on to the customer, and is included on the sticker.
Down Payment
Money you pay at the time of the purchase to reduce the amount that will
be financed.
Finance Contract
The legal document that specifies the terms of a loan.
Grace Period
The period of time after the due date that's allowed before a penalty
is charged.
Insurance
A contract with a company that agrees to reimburse you in the case of
damage or theft.
Interest
The amount paid or charged for the use of money. Interest is expressed
as a percentage rate per period of time.
Invoice Price
The price the dealer pays to buy a car from the manufacturer, exclusive
of hold backs or other discounts.
Lease
A form of financing in which you can use a vehicle for a period of time
in exchange for making payments to the leasing company. In a lease, the
leasing company continues to own the vehicle.
Lien
The finance company's security interest in your vehicle.
List Price
The manufacturer's suggested retail price for a vehicle. Also called "MSRP"
or "Sticker Price'.
Loan
A form of financing in which you borrow money to allow you to purchase
a vehicle. With a loan, you own the vehicle.
Margin
See profit margin
Mark-up
The difference between the invoice price and the price the dealer sells
the car for.
Monroney Sticker
The price sticker required by federal law for all new vehicles.
Lists all the vehicle's options along with the manufacturer's suggested
retail price (MSRP).
Monthly Payment
The amount of principal and interest you are obligated to pay each month.
MSRP
Manufacturer's Suggested Retail Price. The price the manufacturer recommends
for a vehicle. Also called "List Price" or "Sticker Price".
Payment
The amount of principal and interest you pay each month.
Pink Slip
A vehicle's title certificate.
Prime Rate
The interest rate charged by banks to their most credit-worthy customers.
Principal
The amount of the original loan paid to the borrower by the lender. Also
called amount financed.
Rate
The amount of interest on a loan expressed as an annual percentage of
the principal.
Rebate
A special payment from the manufacturer to the customer to promote sales
of slow-selling models. Also called a "Customer Incentive".
Repossession
The situation where a lender takes physical posession of a vehicle due
to default.
Retail Blue Book Value
The approximate value of a used car if sold privately or by a dealership.
A publication of Kelley Blue Book, Inc. and one of several standard references
used to determine the value of used vehicles. The value is sometimes called
the "Blue Book Value." Blue books typically show a wholesale
value and a retail value for each vehicle.
Sticker Price
The manufacturer's suggested retail price for a vehicle. Also called "List
Price" or "MSRP".
Title
A certificate issued by the state department of motor vehicles that proves
ownership of a vehicle. Sometimes called a "pink slip".
Trade-in Value
The value of a used vehicle that you trade in to a dealership as part
of a purchase. The trade-in value will usually be approximately equal
to the wholesale blue book value.
Upside-down
Describes a situation where the balance owed on a loan is greater than
the current value of a vehicle.
Wholesale Blue Book Value
The approximate price that a dealership will pay to purchase a used vehicle.
A publication of Kelley Blue Book, Inc. and one of several standard references
used to determine the value of used vehicles. The value is sometimes called
the "Blue Book Value." Blue books typically show a wholesale
value and a retail value for each vehicle.