Have you ever talked to someone only to then realize you had no idea what they were saying? During a recent conversation with my plumber, I heard the word “flange” and it all went downhill from there.
Jargon can be very frustrating, especially if you’re buying a car. Understanding what you’re reading and hearing can be a total gamechanger.
With that in mind, it might be a good idea remember some key terms for the next time you buy a car. This quick guide can help you understand things when you’re at the dealership.
Amount Financed: This is the amount of money you’re borrowing after your down payment, incentives and/or rebate are taken out and any products you want to purchase and any potential negative equity are added in.
Annual Percentage Rate (APR): Simply put, this is the cost of borrowing funds. The APR is the yearly interest a lender charges on a loan.
Blue Book: Also known as Kelley Blue Book, this is an online tool that can help you find the value of your vehicle.
Bonus Cash: Bonus cash, sometimes known as customer cash, is a type of rebate that is sometimes available on select makes/models for a limited period of time. It is used to reduce the purchase price of a vehicle.
Credit Application: Simply put, this is the document where you ask for credit. It contains information both the dealer and the lender need to start the auto financing process.
Destination charge: Just like it sounds, the destination charge is the fee charged for transporting the vehicle to the dealer from the manufacturer or port of entry. Generally this charge is passed on to you, the buyer.
Down Payment: Usually down payment refers to cash. Positive trade equity can also be included in the down payment. The cash or positive equity you put down is subtracted from the cash price of the new car to reduce your amount financed.
Guaranteed Asset Protection (GAP) Coverage: You can choose to purchase GAP when you finance a vehicle. If you purchased GAP and your vehicle is ever stolen or destroyed, GAP pays the difference between what is owed and what the vehicle is worth.
Late Charge: If your payment is late or missing, you may be responsible for additional fees. Late fees vary by state. Your contract outlines the details for your purchase.
Manufacturer’s Suggested Retail Price (MSRP): The Manufacturer’s Suggested Retail Price (MSRP) represents the manufacturer’s recommended selling price for a vehicle.
Negative Equity: Also known as being “upside down,” this occurs when the amount you owe on a vehicle is greater than what the vehicle is worth.
Vehicle Service Contract (VSC): This is added coverage that you may choose to purchase at the time you purchase your vehicle. What is covered can vary widely depending on the terms and conditions of each agreement, so it’s important to thoroughly understand the coverage before you buy.
Tax, Title and License (TT&L): Based on state rules and regulations, this includes any taxes and fees a dealer may be required to collect and/or process on your behalf.
Total of Payments: This shows you how much all your payments total over the life of your loan.
Trade Equity: Also known as positive equity, this is when the amount owed is less than the market value of a vehicle. If you’re trading your vehicle and you have trade or positive equity, you can use that toward a down payment on your new vehicle.
Vehicle identification number (VIN): Every vehicle manufactured for sale to the public has a VIN. One place to find the VIN is on the driver’s side door where it connects to the frame. It could also be on the driver’s side dashboard.
Understanding what you’re reading and signing can change your car buying experience. Keep in mind that the salesperson and the finance manager are there to help you understand. You should feel comfortable when you’re making a purchase as big as a car. That includes understanding what your contract says and some of the jargon you might hear.