Auto Loan Glossary (A-Z)
This auto loan glossary will help you identify some of the key words and phrases that you will need to know when applying for an auto loan.

Auto Loan Glossary A Z

Reduction of the total debt owed for a car through periodic payments of interest and principal of the full loan amount.
A dealer profit that includes financing, insurance, warranties, VIN etching and the other products and services that a dealer will try to sell you when they are setting up financing.
The property, usually the vehicle itself that is used to support a loan that can be seized if you fail to make the payments.
Down payment
The money that you must pay first to secure a loan, it shows your intent to pay off the auto loan.
The value of your vehicle versus how much you owe on the loan.
Factory invoice
The invoice from the vehicle to the dealer that shows what the purchase price is supposed to be.
Fixed rate
A loan that has a steady interest rate that does not change throughout the life of the loan.
Good credit
Your credit rating showing that you have a good history in repaying debts.
The money that is paid to a dealer from a manufacturer if he sells a vehicle within a specified amount of time, which is usually three months.
Interest rate
The percentage rate applied to the principal amount of your loan.
In some cases, you may be required to justify the purchase of the vehicle (tell the lender why you need the vehicle you have chosen).
Keeping payments
Ensure that you can keep your payments up to date and pay them religiously. Failure to do so may result in repossession of your vehicle.
A claim against your vehicle while you owe money on it to the lender.
Manufacturers Suggested Retail Price.
Not approved
If you are not approved for a loan from one company, you may consider looking at different options for financing.
Open loan
The ability to make extra payments on the principal of your loan without penalty.
Prepayment penalty
The fee that could be charged if you pay off the loan before the end of the term as specified in the contract.
Quick term
A loan that has a shortened term so you can pay off the vehicle quickly.
You must register your vehicle in order to obtain financing. Register with your local department of motor vehicles.
Sales contract
The contract you sign with the dealer regarding the terms of purchase for your vehicle.
The length of your loan in months, usually 45, 60 or 72 months.
Upside-down loan
When you owe more for your vehicle than it is worth.
The sales associate or dealer who sells you the vehicle and transfers ownership to you.
To willingly surrender your right to claim a vehicle.
The ratio of worth of the vehicle to the total cost of the vehicle over a period of time.
When a buyer goes between financers or car dealers to get the best possible price.
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