Terms in Auto Financing: The Basics
Financing sometimes requires a language of its own, one reason many car shoppers get anxious when buying a new vehicle. That's why we at Rudig Jensen have put together a list of the most common terms in automotive financing, helping you to understand some of the words and concepts that may be used during the buying process.
APR - APR stands for the annual percentage rate. This is the annual rate of interest for borrowing money.
Blue Book - This term comes from the company Kelley Blue Book, a third-party that works to provide accurate, real-world values of cars. The "Blue Book" value refers to the amount your car is worth without any strings attached.
Credit - Your credit score or credit rating is a number from 300 to 850 that shows your creditworthiness. In other words, credit shows how likely you are to pay back a loan.
Depreciation - The amount of value a car loses over time. This can be linked to age or wear and tear.
Lease - This is a contract with a dealership that lets you borrow a car for a long period of time. Essentially, leasing is like renting.
MSRP - The Manufacturer's Suggested Retail Price (MSRP) is the price a brand recommends their car is sold for.
Title - Sometimes called the pink slip or certification, a title is evidence of ownership.
Trade-in Value - You can trade your car to a dealership in exchange for money or credit to buy a new car. Trade-in values are often sometimes more than the Blue Book Value because they are used as incentives.
Upside-down - If you're upside-down on a loan, that means you owe more to the lender than the car is worth-one reason many prefer to buy used or to lease.
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