The "Annual Percentage Rate" is a yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR, and the rate is used to compare various loans available, making even simple interest and compound interest loans comparable.
Absolute Low (floor price)
The lowest price a seller is willing to take for a vehicle
This allows a lender to speed up a loan rate if there is a default on the loan.
The added features that are available for a new car.
Interest that increases on an unpaid balance of a loan.
A fee included in most lease transactions that is either paid for up-front or included in the total cost of the vehicle. This fee covers a number of administrative costs, such as obtaining a credit report, verifying insurance coverage, etc.
Adjusted Capitalized Cost (Adjusted Cap Cost)
from the MSRP The price of the vehicle after deducting any dealer participation, manufacturer discounts, and down payment. This amount is also referred to as the net cap cost. This amount is also referred to as the net cap cost
The car dealer will pass this fee on to the buyer for advertising costs.
Agreement of Sale
Also referred to as sales or purchase agreement. It states that the seller is selling and the buyer is buying.
Payment of a loan obligation in a series of installments or transfers.
An initial statement of personal and financial information required to approve your loan.
An opinion of the market value of an asset as of a specific date.
The fee to estimate the value of any property or possession.
Tangible items (possessions or property) to secure a debt.
Any transfer of your loan from one lender to another lender.
The sale process by which multiple bidders compete to purchase a vehicle that is finally sold to the individual offering the highest price.
Certificate of Title :
Is evidence of vehicle ownership issued by the Department of Motor Vehicles when it has confirmed said ownership. There is a fee to receive one based on state, taxes and other possible registration fees.
The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.
Property offered to support a loan that can be seized if you default on your payments. Car and/or a house would be a good example.
When a real estate agent or broker finds and completes a sale, that individual is paid money by the seller for those services rendered.
An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.
Another person who signs your loan and assumes equal responsibility for it. This usually comes into play when the original person applying for the loan does not have enough credit to take on the responsibility themselves.
Reputation for solvency and integrity entitling a person to be trusted in buying goods or borrowing money.
Credit Bureau :
An agency that keeps your credit record.
Credit Card :
A card used from time to time to borrow money or buy goods or services on credit. Visa, MasterCard, American Express and Discover are just some examples.
Credit Scoring System :
A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.
A lender to whom money is owed.
Past and future ability to repay debts.
Debit Card (EFT Card) :
A card that looks fairly identical to a credit card, that an individual can use to make purchases and other electronic transactions. The advantage of this card is that you are not adding to your debt, just withdrawing money from you bank account.
Failure to repay a loan or otherwise meet the terms of your credit agreement.
Failure to make payments on time.
Information about a vehicles history that is given to the consumer, such as accidents or repairs that has been done to the car.
Down Payment or Deposit
The amount of money that is initially deposited to lower the amount Loansd.
Electronic Fund Transfer (EFT) Systems :
A technology for transferring funds electronically rather than by check.
Equal Credit Opportunity Act (ECOA) :
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
The residual value of a business or property beyond any mortgage thereon and liability therein.
General Warranty Deed :
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
Gross Monthly Income :
The total amount the borrower earns per month, before any expenses are deducted.
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
Hazard Insurance :
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.
A charge by the lender, expressed as a percentage of the total amount leant. The borrower pays this charge as payment for the loan.
Interest Rate :
Expressed as a percentage of 100, the annual rate of interest on a loan.
Joint Account :
An account with a financial institution, such as a bank, in which two or more people share the account. All parties involved share legal responsibility to repay loans or debts of this account.
The person who signs a lease to have temporary use of a vehicle.
The company that provides temporary use of a vehicle in return for periodic payment.
Manufacturer's Suggested Retail Price. This is the recommended selling price for a vehicle, set by the manufacturer. Options added or removed from a vehicle effect this price.
Net Effective Income :
The gross income of the borrower, minus the percentage removed for federal and/or state income tax.
Point-of-Sale (POS) :
The physical location at which a purchase is made by the consumer. Additionally, a method a taking electronic payment from a consumer without the need for a traditional check.
Prepayment Penalty :
A bank imposed fee for early payment of a loan. This penalty is meant to protect the bank from lost income not generated from interest on the loan.
See Interest Rate
To provide new financing for an existing loan. The existing loan is paid with the Proceeds from the new loan. Typically the new loan is at a lower rate, or has a longer term than the previous loan.
Service Charge :
Additionally charges based upon the completion of the defined service. May encompass a number of different charges. Services charges may relate to the financial aspects of processing a loan. A Dealer service charge may include preparation of the vehicle for delivery.
Based upon the cost of the vehicle. Contributed to the government for continuation of services. Amount varies from state to state. Some states also place additional taxes on certain types of vehicles. i.e. Luxury tax for cars over a set value, "Gas Guzzler" tax for larger vehicles and SUV's.
For a loan this is the period of time between the beginning of the loan and the end date, at which time the balance of the loan would be due.
A legal document that proves an individual’s ownership of property.
Title Insurance :
Usually issued by a Title Insurance company, protects a homeowner from errors made during a title search. Determined by the value of the property being sold, the cost may be shared between the purchaser and the seller.
Title Search :
Best performed by a title company, this is thorough examination of municipal and public records to determine legal ownership of property.
A person whom is legally entrusted with property for the benefit of another individual or individuals. Additionally to place a debtor’s wages, credits, or property in the hands of a third party, in the interest of the creditor.
Verification of Employment :
Written verification of your employment. Sent by your current employer, this may include your salary information, and your job description.