Auto Financing Glossary: Understanding the Key Terms

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When it comes to auto financing, the experts at Indy Car Financing have the latest hints for both veterans and newcomers alike. For example, there are a variety of key terms you’ll hear when shopping for a vehicle, and this is especially true when auto financing is involved. To help customers secure auto financing that works best for them, we’ve developed this handy list of key terms to know.

Auto Financing Basic Terms

Understanding some basic terms is essential when starting your auto financing process. Make sure to have a firm grasp on the following terms:

  • Creditor: If you are looking to extend your credit, a creditor is a person or organization that will get that done for you.
  • Annual Percentage Rate: This is the percentage of interest on an auto loan that a lender charges on an annual basis.
  • Finance Charge: The total amount of money that credit will cost when you finance a vehicle.
  • Down Payment: The down payment is what you pay up-front to reduce the amount of money you need to finance a car.

Purchasing Terms

When you ultimately decide to invest in a car, you’ll likely hear these terms:

  • Monroney Sticker: More commonly known as a window sticker, this is a list of a vehicle’s MSRP, standard features, options, and the retail price of said options.
  • MSRP: The acronym for manufacturer suggest retail price. This is the base price for a vehicle and its specific trim level.
  • Destination Charge: This is the non-negotiable cost of transporting your vehicle from the factory to the dealership.
  • Documentation Fee: Processing the paperwork for the sale of a car can add up, which is what the documentation fee is used to cover.

Important Auto Financing Terms

While these auto financing terms are a bit more advanced and aren’t nearly as likely to be heard, they’re still important to take note of:

  • Lien Holder: A creditor that has a financial security interest in a vehicle is the lien holder.
  • Capitalized Cost Reduction: This refers to any amount of money (down payment, trade-in value, etc.) that reduces the amount needed to finance a car.
  • Cost of Funds: An extra charge incurred for using a lender’s money when financing a car.
  • Upside Down: This is the term used when you owe more for a loan than on the vehicle itself.

Important Leasing Terms

If you decide to lease a new vehicle instead of finance it, you should familiarize yourself with these terms:

  • Lessor: The person or dealership that owns the leased vehicle is a lessor.
  • Lease Agreement: All of the terms and conditions regarding the use of a leased vehicle are found in this document.
  • Residual Value: This is the estimated value that a leased car is worth at the end of a lease term.
  • Lease Extension: When the lessor and lessee both agree to an extension of a lease beyond the initial term length.

Indy Car Financing Offers Auto Financing Assistance

With these terms in mind, you can contact the professionals at Indy Car Financing if you have any additional questions. Give us a call at 855-468-6215 during our working hours.