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» Auto loan lingo - Definitions of common auto loan terminology:
Auto loan lingo - Definitions of common auto loan terminology:
Auto loan lingo - Definitions of common auto loan terminology:
- Accrue - To accumulate interest charges.
- Amortization - The repayment of a loan by installments with regular payments to cover the principal and interest.
- Amortization Table - A table showing the amount of a principal and interest due at regular payment intervals and the corresponding unpaid balance of the loan after each payment.
- Amortization Term - The amount of time required to amortize the loan. The amortization term is expressed as a number of months. For example, for a 3-year fixed-rate loan, the amortization term is 36 months.
- Amount Financed - The amount of credit provided by a lender.
- Annual Percentage Rate (APR) - The Annual Percentage Rate (APR) is a yearly rate of interest that includes all of the fees and expenses paid to acquire the loan. A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan.
- Auto Test Drive - A hands-on research tool in which the potential buyer drives the auto to test for overall handling, feel, and performance.
- Base Price - The cost of an auto before a franchised dealer adds options. Includes the standard equipment and the manufacturer's warranty.
- Basis Point - An interest rate or yield expressed as 1/100 of one percent.
- Book Value - The value of a used auto in a specific market area. A recognized wholesale appraisal guidebook provides guidance on the auto's value at any given time. Examples of these guidebooks include Black Book, Kelley Blue Book, or NADA Guides.
- Branded Titles - A title labeled by a state titling agency with one of the following comments: Not Actual Mileage, True Mileage Unknown; Reconditioned, Salvage; Rebuilt, Flood, Manufactured Buyback; Lemon Law Buyback; Warranty Return; Exceeds Mechanical Limits; or Reconstructed Prior Collision.
- Cash Price - The price at which a seller offers to sell the property or service that is the subject of the transaction.
- Certificate of Title - A document issued by a state to provide evidence of motor vehicle ownership and any lien holder's security interest.
- Clear Title - A title that is free of liens or legal questions as to ownership of the property.
- Co-Buyer - An individual who purchases an auto jointly with a Buyer. This individual is jointly liable for repayment of the loan and has ownership rights in the property purchased.
- Co-Owner - A second owner of the auto.
- Co-Signer - An individual who agrees to pay the amount due (payment) and to perform all the agreements stated on the contract if the buyer fails to meet contractual obligations.
- Collateral - An asset (such as an auto) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
- Credit Life Insurance - An insurance policy that may be purchased by the borrower to provide protection in the event of death. The insurance company may pay off the account according to the terms of the policy. This protects the borrower's estate from the liability of the debt.
- Dealer Invoice - The amount the dealer pays the manufacturer for an auto.
- Dealer Sticker Price - The total price of the auto. Dealer sticker price is also known as sticker price, or MSRP.
- Depreciation - A decline in the value of an auto over time.
- Destination Charge - The price added into the dealer invoice for moving the auto from the manufacturer to the dealer.
- Down Payment - The part of the purchase price that the buyer pays in cash and does not finance with a loan.
- Due Date - The date in a given month that a loan payment is due.
- Duplicate Title - The request by an applicant to reissue a Certificate of Title when the original has been lost or destroyed.
- Extended Warranty - A contract that covers specified breakdowns after a manufacturer's warranty expires. Manufacturers and independent companies sell extended warranties.
- Fair Market Value - The amount that a willing buyer would pay at a given point in time for the auto in a realistic transaction.
- Finance Charge - The cost of consumer credit expressed as a dollar amount.
- Fixed Rate Loan - A loan in which the interest rate remains constant throughout the life of a loan.
- Franchised Dealership - An automobile dealership authorized by a manufacturer to sell the manufacturer's products.
- Guarantee of Title (GOT) - A letter that guarantees delivery of a properly completed Certificate of Title.
- Guaranteed Automobile Protection (GAP) - A product that pays any remaining balance owed on a loan after payment of a total loss insurance claim.
- Installment Plan - A method of buying an auto on credit and making payments at regular intervals for a specific period of time.
- Lemon Law - A blanket term used to refer to various state laws that protect consumers against the purchase of an auto found to be persistently defective.
- Lien - A security interest in property, such as an auto, to secure the payment of an obligation.
- Loan-to-Value Ratio (LTV) - A ratio used to determine the amount of money a lender will loan based on the value of the auto. It is calculated by dividing the loan amount by the Retail Value or Manufacturer's Suggested Retail Price (MSRP).
- Manufacturer's Suggested Retail Price (MSRP) - The auto sales price suggested by the manufacturer.
- Maturity Date - The date on which the balance of the loan becomes due and payable.
- Options - Features that are added to a base model. For automobiles, examples include a sunroof, standard or automatic transmission, and bucket seats. Options are also referred to as add-ons.
- Preferred Placement Form - The form that is completed with an individual's financial information in order to submit and search for the best matched lender to the individual's specific credit needs.
- Principal - The amount of the auto loan without the interest factored in. In other words, the amount you are financing and will be paying interest on.
- Principal Balance - The unpaid balance of a loan.
- Rebate - A manufacturer's reduction to the price of an auto, which serves as an incentive to buyers. May also be referred to as a manufacturer's rebate or customer incentive.
- Regulation Z - A regulation that implements the Truth-In-Lending Act. It applies to all lenders and requires disclosure of credit terms.
- Retail Blue Book Value - The value of a used auto in a specific market area. See Book Value.
- Retail Price - The amount the buyer pays the seller for an auto.
- Service Contract - These are contracts that provide financial coverage to repair or replace any failure or breakdown within the limits of the policy.
- Sticker Price - Refer to Dealer Sticker Price.
- Title - The evidence one has of right to possession. See Certificate of Title.
- Total Sales Price - The total price of a credit purchase including any down payment equal to the total of payments plus any down payment.
- Trade-In - An auto exchanged for a credit amount on the purchase of a new auto.
- Trade-In Allowance - A credit amount given to a customer upon purchase of a new auto, in exchange for their old auto. This credit amount may reduce the cash price of the new purchase.
- Vehicle Identification Number (VIN) - An individual serial number assigned by the manufacturer to a motor vehicle. The alphanumeric number consists of seventeen (17) digits is located on the auto's dashboard and visible through the windshield.
- Warranty - A guarantee from the dealer or manufacturer that an auto will perform as expected or specified. Warranties usually cover specific mechanical problems for a specific number of miles or amount of time.
- Wholesale Book Value - The amount the dealership usually pays for a used auto in markets other than retail, typically auctions and broker transactions.
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