New vs. Used Cars
This term refers to a vehicle that has never been titled or owned by another individual consumer.
What is a new car?
This is the original sum of money borrowed for a loan, before interest and fees are added.
What is the principal?
This entity—such as a bank, credit union, or online lender—provides the money to finance your car purchase.
What is a lender?
Taking a car for a short driving evaluation before buying it is known by this standard term.
What is a test drive?
Selling your current vehicle directly to the dealership to offset the price of your next vehicle is called this.
What is a trade-in?
This term describes the immediate drop in a new car’s market value—often 10% to 20%—the moment you drive it off the dealership lot.
What is depreciation?
Represented as a percentage, this key figure reflects the total annual cost of borrowing money, including fees and interest.
What is APR (Annual Percentage Rate)?
In an auto loan, the car acts as this type of asset, which the lender can repossess if you default on payments.
What is collateral?
This extra line item on a vehicle sticker covers the cost of transporting the car from the factory to the dealership and is usually non-negotiable.
What is the destination fee (or freight fee)?
Instead of buying a car outright, this option allows you to "rent" a vehicle for 2 to 3 years under a structured contract.
What is a vehicle lease?
Certified Pre-Owned (CPO) vehicles undergo a thorough inspection and typically come with this type of extended manufacturer backing.
What is a factory warranty?
A high numerical score in this 3-digit credit system gets you approved for lower interest rates on auto financing.
What is a FICO score (or credit score)?
Dealership finance departments often offer 0% APR incentives backed directly by the car company's internal lending arm, known as this.
What is captive financing (e.g., Toyota Financial, Ford Credit)?
This practice involves taking a used vehicle to an independent mechanic for a full inspection before completing the purchase.
What is a Pre-Purchase Inspection (PPI)?
If you exceed the set distance cap (such as 12,000 miles per year) on a leased car, you must pay this extra per-mile penalty at lease end.
What is an excess mileage fee?
While new cars carry higher purchase prices and insurance rates, used cars generally carry a higher risk for this recurring ownership expense.
What are maintenance and repair costs?
This standard upfront payment reduces the total amount you need to borrow and lowers your monthly payments.
What is a down payment?
This mandatory itemization document details the sale price, interest rates, dealer documentation fees, taxes, and trade-in value before you sign.
What is the bill of sale (or buyer's order / financing contract)?
Added to the sale price by the dealer, MSRP stands for this benchmark pricing term set by the manufacturer.
What is Manufacturer's Suggested Retail Price?
Trading in a vehicle with positive equity allows you to use that value to reduce the purchase price of your next car, lowering this state tax burden in many regions.
What is sales tax?
Buying a brand-new car allows you to select custom factory options, whereas buying used limits you to this market availability factor.
What is current inventory (or existing condition/specifications)?
Extending your loan term from 48 months to 72 months will lower your monthly payment, but it drastically increases this total cost.
What is total interest paid over the life of the loan?
This insurance policy covers the financial gap between what your auto insurance pays out and what you still owe on your loan if the car is totaled.
What is GAP (Guaranteed Asset Protection) insurance?
This term refers to the final out-of-the-door price of the vehicle after adding all taxes, title fees, registration, and dealer fees.
What is the "out-the-door" (OTD) price?
In a lease contract, interest is not expressed as an APR, but rather as this decimal figure (which you multiply by 2,400 to find the equivalent APR).
What is the money factor (or lease factor)?