Amount Finance: How much, in dollars, that will be provided to you in credit
is not as complex as it sounds. Amortization is the act of paying off a car
loan with a fixed monthly payment over a specific period of time. A portion of
your payment will go towards the principal amount (amount borrowed), while the other
part will go towards interest
APR: Annual Percentage Rate, or the cost of credit as a percentage
Base Rate: Also called the “sticker price” or
“manufacturer’s suggested retail price” (MSRP), this is the standard price
before equipment, additions, destination fees, and warranties.
Equity: The difference between the balance of your trade pay off and its actual value, which can be either positive or negative
Fixed Rate Financing: Financing in which the rate remains the same over the entire term of the contract
Direct Lending: A loan garnered directly from your bank, finance institution, or credit union
Dealer Financing: Financing done through the dealership where you have purchased your vehicle
Finance Charge: The dollar amount you pay in order to use credit
lien occurs when you borrow from a financial institute who, subsequently, owns
your car until it is paid in full. The lienholder is the actual institute,
while a lien is the right (of the bank) to own your car while you’re in debt.
Simple Interest: A calculation of the finance charge determined by your unpaid principal balance, your APR, and the amount of time between payments
Term: The number of monthly payments expected over the course of your contract
Trade In: A
vehicle that you exchange while buying a new car. Generally, dealerships put
the money of your trade in towards a new vehicle. This is a great way to get a
deal selling your old car.
Usury Laws: Again, you’ll see this phrase a
lot. Simply put, these are a set of regulations that govern how much a bank can
charge in interest. “Usury” is the act of lending money with interest.
Variable Rate Financing: Financing in which the rate fluctuates throughout term (NOTE: this is not a common form of financing)