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