One of the best ways to prepare for car shopping is to learn the common finance terms and concepts that are used in the market. While it can sometimes seem like auto lenders are using an entirely different language than you, there are a few ways to get a leg up before you visit dealerships and shop around.
APR – The APR, or Annual Percentage Rate, is the annual interest rate in addition to any other fees. In auto finance, most APRs are fixed rates, which means they don’t change over the life of the loan.
Blue Book – Referring to Kelley Blue Book, Inc., this is a third-party company that evaluates cars and gives them a “Blue Book Value,” which tells you how much your car is worth based on an objective source.
Credit Score – Your credit score is a rating that tells lenders how much of a risk you are in the context of lending. Credit scores can be between 300 and 850 (850 being the best).
Default – To default on a loan is to violate the terms of a contract. This usually refers to a failure to make monthly payments, which is detrimental to a borrower’s credit.
Destination Charge – This fee is charged to dealerships by manufacturers to deliver a car from the factory to the lot. It is often passed on to the buyer as a part of the MSRP or base sticker price.
Lender – The lender is the dealership or bank you are borrowing money from.
Lien – If you finance, a lien is when the car is officially owned by a finance company until you pay off your debt. Until the loan is repaid, the lender has legal right to possession of the vehicle.
Title – Distinct from the registration, the title is the document that proves you own a vehicle. It is sometimes called the “Pink Slip,” though it is not necessarily pink.
Having a basic understanding of auto finance terms will lessen your anxiety about car shopping, and we at Don Wessel Honda are determined to help even further. When you come into our dealership, we will have a dedicated team member walk you through the financing process so you can feel confident about your vehicle and finance decision.