Have you ever been at the store and not known how much something was because it was in the wrong section? I found my favorite popcorn at a store I don’t normally visit. I asked an associate how much it was. He started talking about SKUs and PLUs and I had no idea what he was talking about.
I got my popcorn. But it made me think. If something so small could be confusing, how do others feel when they, for example, buy or sell a vehicle?
With this in mind, here are some key terms that can help you with your next trade-in!
Blue Book: Also known as Kelley Blue Book, this is an online tool that can help you find the value of your vehicle.
Depreciation: Depreciation means how much value your vehicle loses each year.
Down Payment: Typically a down payment is considered cash. But it can also be equity from a trade-in. The cash or trade equity is subtracted from the cash price of your new vehicle to reduce the amount you need to finance.
J.D. Power (formerly known as NADA guide): This guide provides retail prices for customers and it also provides a list of trade-in values to dealerships. This valuation method is used for about half the country.
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.
Positive Equity: Also known as trade 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.
Power of Attorney: A power of attorney is a legal document. It empowers someone other than yourself to act on your behalf.
Title: The title of the vehicle is the ownership document. When a vehicle changes ownership, the title is transferred to the new owner’s name within a specified period of time, depending on state rules and regulations.
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 vehicle trading experience. Keep in mind that the salesperson and the finance manager are there to help you understand. You should feel comfortable when you’re completing a vehicle transaction. That includes understanding what your contract says and some of the jargon you might hear.
Dennis Flynn spent the last 20 years working in auto finance. He spent time in various roles from processing titles to managing a team of credit buyers. In his free time, he likes playing video games and cheering his daughters on at their sporting events.
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