Buying a new or used car can be a stressful time, especially if you don't know the lingo car dealerships typically use. Here are some of the most commonly used finance terms that you could hear or use during the car buying process. If you have any questions regarding finance terms, you can always contact us and one of our friendly staff members will be happy to assist you!
Annual Percentage Rate (APR): A yearly rate that calculates the cost of debt and takes into account things like interest and insurance.
Asset: Something an individual owns that is worth money, such as a car or a home.
Blue Book: An abbreviated form of “Kelley Blue Book,” a guide for car buyers and sellers that helps estimate vehicle retail prices.
Book value: The original, full price of an asset.
Commission: A fee paid to a salesperson when they sell an asset.
Contract: A formal document that secures a binding agreement as to the financing of an asset.
Current liabilities: Any debts that must be paid within one year.
Dealer holdback: When auto manufacturers sell vehicles to dealers at a 2 or 3 percent discounted price so they may make a profit.
Dealer incentives: Programs offered by manufacturers to increase the sales of slow-selling models.
Destination charge: The cost of transporting the vehicle from the manufacturer to the dealer.
Down payment: The amount of cash that someone pays upfront for an asset before financing a loan.
Gap insurance: Covers the difference between the book value of a vehicle and what you still owe.
Interest Rate: The amount charged on a loan – the cost of credit. Typically expressed as a percentage.
Lease: Temporary ownership of an asset, similar to renting. Monthly costs and mileage allowances (in cars) are negotiated by a contract.
Mileage charge: Charges that must be paid when the lessee of a leased car drives over the negotiated amount of miles.
MSRP: Manufacturer's Suggested Retail Price. The recommended selling price of a vehicle. The dealer's price may be higher, or the buyer may be able to negotiate the price lower.
Sticker price: Same as MSRP – the base retail price of a vehicle.
Vehicle Identification Number (VIN): A number the manufacturer assigned to a specific vehicle. Can be used to track vehicle history.