Car Loan Language

Amortization:

The payment of one's loan in monthly installments.

Annual Percentage Rate (APR):

The rate of interest per year that you're required to pay to receive a loan, which includes other related fees. The APR is required by law to be disclosed, making comparison shopping simpler.

Creditworthiness:

The manner in which you've repaid debt in the past, and the ability to pay off future debt as well.

Dealer Invoice:

The amount that a dealer is obligated to pay the manufacturer of the purchase price.

Depreciation:

The lowered value of a vehicle over its lifespan, affected by both mileage and deterioration. Vehicles depreciate in value rapidly in the first few years.

Down Payment:

The amount paid during the purchasing process, typically paid in cash or the value of a trade-in. This is the interest-free difference between the purchase price and loan total.

Fair Market Value:

The worth of a given automobile based on mileage, mechanical condition, appearance, and so forth.

Kelley Blue Book:

A publication for used vehicles listing retail and trade-in values.

Monroney Sticker Price:

The price that appears on the car window, as required by law. It shows the base price, the installed options and manufacturer's suggested retail price (MSRP), the manufacturer's transportation cost, and the gas mileage.

Up front Costs:

Rather than being spread across the life of the loan, these fees are collected at the time the loan is taken out. Upfront costs often reduce the interest rate of the loan over time.

Upside-down:

A vehicle is upside-down when its value is lower than the remaining balance on the loan. Becoming upside-down is very common in the first year of ownership.

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