Fixed rate financing. Annual percentage rate. Negative equity. Assignee…after a while, a car salesman can sound a lot like the teacher from Charlie Brown when they start throwing around these words.
When buying a car, you need to sound knowledgeable and confident if you’re going to get the vehicle you want at the price you want. But the semantics of purchasing a vehicle gets muddled with confusing financial jargon that includes: APR’s, variable rates, financing costs, and so on.
After hearing all these car financing terms, it’s real easy to get discouraged and to settle with whatever contract comes your way.
However, it’s important to study up on car financing jargon before entering into a negotiation. Doing so will give you the confidence you need to make an informed decision during your next vehicle purchase. Knowing these terms can also help you determine your budget as you begin your search for a new car or truck.
Some common terms you’re likely to hear in the dealership (and their meanings) are:
- Applied Percentage Rate (APR) – This is the annual rate of interest, which includes all fees. This term can be confusing, but know that the APR of an auto loan is negotiable.
- Assignee – This is the third-party lender that purchases the vehicle contract through direct lending.
- Credit Report – A document that informs lenders of a borrower’s previous credit history. Credit reports are filed prior to both dealership financing and direct lending.
- Down Payment – This is the initial payment upon purchasing a vehicle.
- Monthly Payment Amount – This is the amount of money due each month on a loan. When purchasing a vehicle it is important to have this number in your mind when considering your budget.
- Negotiated Price of Vehicle – This is the vehicle cost after accounting for special savings or rebates offered by a dealership. These savings should be reflected in the contract.
- Term Length – This refers to the length of loan, which is normally discussed in terms of months.
