TERMS ASSOCIATED WITH CAR LOANS
Below are the most frequently used terms linked with
auto financing. If you have any questions, please
Extras offered when buying a car from a dealership.
Popular add-ons include tinted windows, satellite radio,
navigation systems, DVD players, etc..
Amount due at lease signing
These are the fees that most be paid up-front when
you lease a vehicle.
Annual percentage rate (APR)
This is the interest rate associated with your auto
loan. Typically calculated as a yearly rate.
When you lease a car, the dealer will charge you a fee
for processing your application. The fee is for
insurance verification, credit reports and general
This is the price that the dealership will have posted
on the vehicle. It is called 'asking price' because the
dealer is open for negotiation.
The price of a car prior to the addition of options.
This cost includes the manufacturer's warranty and the
Blue book or Kelly Blue Book
A price guide indicating the fair value of cars.
Provides a comprehensive history of a vehicle based
on the VIN number. This report will contain information
about who has owned the
car, if the car was every stolen or in an accident as
well as if any repairs have been performed.
Certificate of title
Certificate indicating legal ownership of a car.
Provided by a title company.
Type of lease that allows a car owner to return
their vehicle to pay specific fees at the conclusion of
their lease. This type of lease is considered more
high-risk by lenders. Therefore the cost is typically
more expensive than a regular lease.
A 2-3% profit window given to dealers by
Incentive programs given to dealers by car
manufacturers that are designed to help sell vehicles or
to get rid of surplus cars in inventory. Typically, the
buyer will also benefit from the savings.
The cost a vehicle paid by the dealership. This
price includes the delivery of the vehicle. The dealer
invoice is usually reduced by dealer rebates and
Never pay this fee. This is when the dealer will try
and charge you a fee for the preparation of your
vehicle. However, the dealers are already paid this fee
by the manufacturers.
Dealer sticker price
Required by law to be positioned on the
window of every car in a dealership. Includes the base
price, standard features, add-ons with their retail
prices, fuel economy, delivery charges, and the
manufacturer’s suggested retail price (MSRP).
Cost you are charged by dealers for having the car
delivered to the dealership from the manufacturer.
The cost charged by the dealer for returning and
selling of a vehicle at the conclusion of a lease.
Excess wear charge
Charges you pay when you return a leased car in a
condition that is greater than the wear-and-tear limits.
Commonly known as 'service contracts'. Pays for
repairs and services that exceed basic warranty
The interest rate associated with your auto loan.
Otherwise known as the annual percentage rate (APR).
A contract that grants you use of a vehicle for a
certain amount of time. You will have monthly payments
similar to a car loan. You will have the option of
buying the car at the conclusion of your lease.
Allows you to extend the terms of your lease, with
the same monthly payments.
The cost you pay when you drive your vehicle you
lease more than the annual mileage limits.
Otherwise known as Manufacturers Suggested Retail Price.
This is the cost of a car with add-ons.
Type of lease where the buyer must pay the
difference between the market value of the car and the
residual value at the conclusion of the lease.
The lowering of a vehicle's price by the
manufacturer to help increase sales.
Is when you car is taken away from you when you fail
to make auto loan payments. We feature a section that
tips on how to prevent repossession.
The estimated worth of a vehicle when it is brought
back after the lease expires.
Rule of 78’s
Dealers typically no longer use this policy. It is a
refund of finance costs for paying your auto loan off early.
Indicates who is the legal owner of a vehicle.
Trade in value
The price a dealer will pay you when you look to
reduce the price of a new car purchase by trading-in
your old vehicle.
When you owe more on your auto loan than the your
car is worth.
Otherwise know as the Vehicle Identification Number.
Used to keep records of a car. Similar to a social
A guarantee of a car's performance by the dealer or
manufacturer. A warranty will cover certain costs and
repairs for a specific time frame or amount of mileage.
Learn More Terms:
Credit Card Terms
-Being a Loan Co-Signer
for Lease Buy-Outs
-Learn How to Avoid Becoming Upside-Down on Your Auto Loan