Amortization
The reduction and retirement of a debt through periodic payments of
interest and principal.
Accrued Interest
Interest which accumulates on the unpaid balance of loan principal.
APR:
Annual Percentage Rate
Backend:
Another dealer profit center that includes financing, insurance, warranties,
VIN etching, and those other things they try to add to the deal when
you're setting up financing
Backdoor money:
Additional rebates the dealers get from manufacturers for selling their
cars
Collateral
Property offered to support a loan that can be seized if you default.
Creditworthiness
Past and future ability to repay debts.
Default
Failure to repay a loan or otherwise meet the terms of your credit agreement.
Down payment
This is what you put down to symbolize your intent to pay off the rest
of the vehicle. The more money you pay up front, the less you'll pay
every month. A larger down payment may also garner you a lower interest
rate.
Factory invoice:
The invoice from the manufacturer to the dealer that is supposed to
be their purchase price - It's not their actual cost because of holdbacks,
advertising fees, gasoline charges, dealer discounts, rebates, and other
dealer incentives.
Front-loaded loans:
Loans that require payback of mostly interest in the beginning so that
the lender gets paid first
Holdback:
Money the dealer gets from the manufacturer if he sells a car within
a specified time (usually three months)
Lessor
A company that provides temporary use of property usually in return
for periodic payment.
Lien
A claim upon a piece of property for the payment or satisfaction of
a debt or obligation.
M.S.R.P.:
The total Manufacturer's Suggested Retail Price. This may not include
items the dealer has added such as security systems, VIN etching, etc.
The total Base M.S.R.P. is the suggested retail price with no options.
The total Base M.S.R.P. plus Options price includes all options. Both
the Base M.S.R.P. and the Base M.S.R.P. plus Options may still not include
additional items that have been added at the dealership (as mentioned
above).
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Prepayment Penalty:
A fee that some loans charge if you pay off the loan before the end
of the term.
Principal
The amount of debt, not counting interest, left on a loan.
Simple Interest Loans:
Also known as "flat rate interest," simple interest is calculated
only on the initial amount of the loan by multiplying the principal
balance by the rate of interest by the term of the loan. This number
is then divided by the number of months of the loan for the amount of
interest paid each month.
Term:
The length of the loan in months
Title
A document that gives evidence of an individual's ownership of property.
Total Price
Tthe price you and the dealer finally agree on, minus any rebates. The
dealer will calculate tax based on this amount.
Trade-in allowance:
The amount of money taken off the purchase price of the new car for
the trade-in of your old car
Upside-down Loan:
When you owe more on your car than it is worth
