Keeping up with common automotive finance terms isn’t something most people do as a hobby. In fact, most people don’t know what to expect until they’re sitting down to sign a contract. Don’t walk into your next car purchase blind! Check out these common finance terms, then head down to Tropical Ford of Orlando to see what kind of deal you can get on your next vehicle.
An acquisition fee is a fee paid to the leasing company when taking out a lease. Buyers have the option of paying the acquisition fee up front or include it in the loan.
The annual percentage rate, APR, is the determination of how much interest a buyer pays throughout the year. The APR is calculated based on the amount financed.
The balance due is how much the buyer owes after adding any down payments, trade-in values, and cash advances.
The buy down technique means paying a lump sum up front in order to reduce the interest rate of the loan. Paying more up front doesn’t necessarily save money, but it could reduce the money payment amount.
A co-signer, also known as a co-buyer, signs off on an auto loan agreement to help a subpar applicant obtain financing. Should the applicant fail to make payments and adhere to the agreements set within the loan contract, the co-signer is responsible for fulfilling the agreement.
A creditor is the lender and a debtor is the borrower.
A fixed rate loan, also known as a flat rate, is a loan with an interest rate that doesn’t change throughout the loan. The interest rate remains constant. The vast majority of auto loans are fixed rate loans.
Guaranteed Auto Protection (GAP) Insurance is insurance coverage that pays off the loan’s remaining balance if the vehicle is totaled. GAP insurance ensures that the borrower isn’t left with an outstanding balance on an inoperable vehicle.