Use Our Helpful Car Finance Glossary to Make Your Next Purchase a Breeze

Our Helpful Car Finance Glossary

Shopping for a new or used car can be overwhelming enough; don’t let jargon stop you from getting the most for your car-buying dollar. Our helpful car finance glossary will give you a leg up when negotiating with dealers in the Quad Cities, including Davenport, Moline, Rock Island, Debuke, Coal Valley, and beyond.

Our Car Finance Glossary

Here are a few of the most common terms you’ll encounter when financing a car:

  • Bad Credit – Credit is an indication of a buyer’s ability to repay a loan. Poor credit indicates a history of late payments and/or inability to pay in a timely manner.
  • Blue Book – The value of a vehicle as determined by Kelley Blue Book.
  • Debt-to-Income-Ratio – The amount of money an applicant owes compared to their total income.
  • Depreciation – An item’s loss of value over time due to wear, tear, and age.
  • Destination Charge – The fee a manufacturer charges a dealership to transport the vehicle to their site.
  • Down Payment – The initial payment due prior to financing the vehicle. This amount helps to reduce the overall cost of credit.
  • Equity – The value of the vehicle above the amount financed.
  • Grace Period – The interval between the payment due date and the time when late fees are assessed.
  • Lease – The monthly fee an individual pays to borrow a vehicle over a set period of time.
  • List Price – The manufacturer’s suggested price, also known as MSRP.
  • Mark-up – The amount a dealer charges above the invoice price.
  • Net Income – An individual’s total wages minus taxes.
  • Payment to Income Ratio (PTI) – The percentage of a borrower’s monthly income a loan will require for repayment.
  • Principal – The amount financed, not including interest or service charges.
  • Refinancing – The replacement of one loan with another, typically more advantageous, loan. Often with a new lender.
  • Stips – Contract requirements, or stipulations, that must be met prior to the funding of a loan contract.
  • Title – The document provided by the Department of Motor Vehicles that shows the legal owner of a vehicle.
  • Trade-in-Value – The value of a driver’s current vehicle, which is often used to reduce the cost of a new purchase.


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