Car-Buying Terms Glossary

The unfold of English as an international language has made worldwide tour more and more clean for Americans, however stroll into any vehicle dealership with inside the U.S. and you may swear the salespeople are speak me a overseas tongue. The quantity of surprising terminology is one of the matters that make shopping for a vehicle so demanding for lots people, so we’ve compiled the subsequent word list to put together customers for a number of the terminology they’ll face on the dealership.

Annual Percentage Rate (APR): Also referred to as a finance price, that is the hobby price on a mortgage; a percent of the quantity borrowed that a lender expenses yearly for the usage of its cash.

Acquisition Fee: A rate charged through the provider for starting up a hire; ostensibly covers the fees of processing the hire—credit score reviews and coverage verification, for example—however is in reality natural income. Although many expenses related to a hire are negotiable, this one is usually unavoidable.

Balloon Payment/Balloon Loan: A mortgage that can pay off handiest a part of a car in the course of its time period and needs a big sum—the “balloon”—to be paid on the cease of the mortgage.

Bump: The distinction among the price a provider can pay for financing on a mortgage or a hire (referred to as the Buy Rate) and the price at which they promote the financing to you (the Sell Rate)—generally round one percent. Dealers usually do not expose this bump, so do your homework at the real price being presented through the producer or finance business enterprise and negotiate to lessen or put off the bump. Also called a Spread.

Buy Rate: The price at which a vehicle provider acquires financing. The provider cans income through imparting the financing to a purchaser at a better value (Sell Rate) and retaining the distinction (Spread).

Buyout Price: The fee of purchasing a vehicle on the cease of the hire time period. If you watched you may purchase your car on the cease of the hire, cautiously evaluate the fees of purchasing outright to the ones of buying after a hire. A excessive residual/excessive cash thing hire might also additionally yield an appealing price, however it makes for a awful deal in case you purchase the auto on the cease. A low residual/low cash thing hire can yield a comparable month-to-month price in the course of the hire and permit a higher deal for consumers at hire-cease. Sadly, the previous continues to be the extra common imparting.

(Net) Capitalized Cost: A leasing time period meaning the sum general being financed via the hire—Buy used cars fee plus any extras and minus the capitalized value reduction. Also called “Adjusted Cap Cost.”

The reduction of the amount financed by a hire is known as capitalized cost reduction.

Closed-End Lease: A hire that offers the lessee the choice of both shopping for the auto on the cease of the time period at a fixed fee or strolling away without legal responsibility for any surprising discounts with inside the car’s value (apart from the ones as a consequence of harm or modifications). Closed-cease rentals are what almost all vehicle agencies and banks offer, however it’s far clever to confirm that your hire is closed-cease. Also called a “stroll-away hire.”

Cost of Funds: An APR, a cash thing, or a lease price, that is the price for the usage of the bank’s—or some other lenders—cash to accumulate the auto. Also called financing fees.

Dealer Holdback: A small percent of a car’s value that a producer can pay returned to a dealership after the car has been sold. This is what permits dealerships to promote automobiles at bill fee or beneath and nonetheless make a income.

Dealer Incentives: Special gives from vehicle producers to their sellers—which might be typically exceeded directly to the customer—to inspire income in a gradual marketplace or whilst extra stock builds up.


Dealer Invoice: The quantity a producer expenses its sellers for a vehicle.

Dealer Prep Fees: Charges—typically negotiable—introduced to the acquisition fee of a brand new vehicle to cowl the value of making ready the auto on the market after its delivery to the dealership.

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