 |
|
|
- APR
(Annual Percentage Rate)
- A yearly
rate of interest which includes fees and costs paid to acquire
the loan. Lenders are required by law to disclose the APR, and
the rate is used to compare various loans available, making
even simple interest and compound interest loans comparable.
- Advertising
- An amount
charged the buyer to cover the cost of national and local advertising.
Many suggest that this fee should be no more than 1-1.5% of the
MSRP.
-
- Amortization
- The gradual
reduction of a debt by periodic payments large enough to meet
current interest payments and to repay the principal at maturity.
The loan is repaid through regular, monthly payments of principal
and interest paid for a pre-determined amount of time.
-
- Application
- An initial
statement of personal and financial information which is required
to approve your loan.
- Appraisal
-
An
opinion of the market value of an asset as of a specific date.
-
- Base
Price
- The cost
of a car without options, but including standard equipment, factory
warranty, and freight. This price is printed on the Monroney
sticker.
- Capitalized
Cost
- The total
amount of value for the car upon which a lease is based, similar
to the selling price of an automobile you purchase.
- Capitalized
Cost Reduction
- The amount
paid in cash or trade-in at the inception of a lease, similar
to a down payment.
-
- Closed
End Lease
- A lease for
which the amount representing the residual
value of the auto at the end of the lease is mutually agreed
upon within the lease. Risk of depreciation greater than anticipated
is born by the lessor, the company leasing the vehicle.
- Collision
Insurance
- Insurance
which covers damage to your vehicle which results from a collision
with another vehicle or object.
-
- Comprehensive
Insurance
- Insurance
which covers damage to your vehicle caused by events other than
a collision, such as flood, fire, hail, theft, or vandalism.
- Dealer
Charges
- Charges for
extra services or products sold by the dealer, including rust
proofing, undercoating and extended warranties.
- Dealer
Holdback
- An allowance,
usually between 2 and 3% of MSRP, which manufacturers provide
dealers, frequently as a credit to the dealer's account. A holdback
allowance may allow the dealer to pay the manufacturer less than
the invoiced amount. Therefore, the vehicle could be sold to you
at cost while permitting the dealer to receive a small profit.
Holdback is also known as a "pack".
- Dealer
Incentives
- Programs
offered by manufacturers to increase the sales of slow-selling
models or to reduce excess inventories. Dealers may elect to pass
on the savings to the buyer.
- Dealer
Invoice
- The amount
which dealers are invoiced or billed by the manufacturer for a
vehicle and any optional accessories.
-
- Dealer
Sticker Price
- The Monroney
sticker price plus the suggested retail price of dealer-installed
options, dealer preparation, and undercoating.
- Depreciation
- The decrease
in the market value of a vehicle over time. The amount of yearly
depreciation is influenced by car condition, supply and demand
in the resale marketplace, and reputation of the manufacturer
and model. Convertibles, autos with large engines, trucks, and
vans tend to depreciate less than other vehicles.
- Destination
Charge
- The fee charged
for shipping, freight, or delivery of the vehicle to the dealer
from the manufacturer or port of entry. This charge is to be passed
on to the buyer without any mark-up.
-
- Down
Payment
- The difference
between the loan amount and the purchase price, usually paid immediately
upon purchase in the form of cash or trade-in value.
- Escrow
- A process
within a transaction in which a neutral third party carries out
the procedures necessary to transfer ownership of a vehicle.
- Gap
Protection
- A type of
insurance covering the amount owed due to early termination of
a lease agreement which is not covered by auto insurance. Involuntary
early termination of a lease may occur when a car is stolen or
significantly damaged in an accident. The actual cash value of
the car paid by auto insurance may not be adequate to pay the
lease payoff balance and early-termination penalties.
-
- Gross
Income
- For qualifying
purposes, the income of the borrower before taxes or expenses
are deducted.
- Invoice
Price
- The manufacturer's
initial charge to the dealer, always including freight ("destination"
or "delivery") charges. This price may not reflect the
dealer's final cost due to rebates, allowances, discounts, and
incentive awards the dealer may receive.
- Interest
Rate
- The periodic
charge, expressed as a percentage, for use of credit.
- Lien
- A claim against
a vehicle by another party which utilizes the vehicle as security
for repayment of a loan or other claim. Usually affects the ability
to transfer ownership.
- Loan
to Value Ratio (LTV)
- A ratio determined
by dividing the sales price or appraised value into the loan amount,
expressed as a percentage. For example, with a sales price of
$10,000 and an auto loan of $8,000, your loan to value ratio would
be 80%.
-
- Lock
or Lock In
- A commitment
you obtain from a lender assuring you a particular interest rate
or feature for a definite time period. Provides protection should
interest rates rise between the time you apply for a loan, acquire
loan approval, and, subsequently, close the loan and receive the
funds you have borrowed.
- Manufacturer's
Rebate
- A program
offered directly to the buyer by manufacturers to increase the
sales of slow-selling models or to reduce excess inventories.
- Money
Factor
- A percentage
representing the cost of the money required to lease a vehicle,
similar to the interest rate paid on a loan.
- Monroney
Sticker
- Required
by federal law, the price which appears on a label affixed to
the car window showing the base price, the manufacturer's installed
options with the manufacturer's suggested retail price, the manufacturer's
freight or transportation charge, and the fuel economy (mileage).
The label may not be removed by anyone other than the purchaser.
- MSRP
- The "Manufacturer's
Suggested Retail Price" is the recommended selling price
for a vehicle and each of its optional accessories.
-
- Open
End Lease
- A lease for
which you, the lessee, must pay any difference between the residual
value of the auto agreed upon within the lease and the fair market
value, if lower, of the auto at the end of the lease. Risk of
depreciation greater than anticipated is born by the lessee.
- Preparation
Charges
- Charges imposed
by a dealer for preparing a newly purchased car for delivery to
the buyer. Includes filling the gas tank, verifying appropriate
fluid levels, last minute touch-up cleaning, etc.
- Reconditioning
Reserve
- A security
deposit paid when leasing a vehicle.
- Residual
Value
- The amount
agreed upon to represent the value of the car at the termination
of a lease, usually determined by the amount of depreciation in
the car's value predicted during the term of the lease.
- Title
- The written
evidence that proves the right of ownership of a specific vehicle.
- Trade-in
Value
- The amount
that the dealership will credit you for the vehicle you provide
as partial or full payment for another vehicle. Amount credited
is frequently about 5% below the wholesale value of the vehicle.
- Underwriting
- The process
of verifying data and approving a loan.
- Upside-down
- A situation
which occurs when the value of your vehicle is lower than the
outstanding balance of the loan secured by the vehicle.
|
|
|
