Traversing the labyrinth of automotive financing can be difficult, even with help from a dealership’s finance department. Fortunately, the knowledge of a few common finance termscan provide a few shortcuts, or an entire road map, to successfully financing a new vehicle.
Add-On Interest – Interest calculated at the beginning of the loan term then added to the total amount. Add-on interest must be repaid even if the load is repaid before the contract requires.
Base Price – Standard equipment and the manufacturer’s warranty add up to the base price of a vehicle. There are no options or available features included in the base price.
Blue Book – The value of a used or trade-in vehicle is known as the Blue Book value. There are plenty of available valuation guides online, including Kelley Blue Book.
Invoice Price – The amount the manufacturer charges for a new car. This may not be the dealership’s final price due to rebates and other incentives.
Service Contract – Otherwise known as an extended warranty, this is an extension of the initial warranty.
Destination Charge – The fee a manufacturer charges for transporting the vehicle. This charge is normally added onto the buyer’s price.
Rebate – A manufacturer’s reduction of the price of a car in order to further incentivize buyers.
Title – A legal document that contains information about the vehicle and is used as official proof of ownership.
Trade-In Value – The amount of credit a dealership will offer as partial payment for a different vehicle.
Preparation Charges – A fee a dealership may charge a customer to prepare a car. The manufacturer has already paid the dealership for the preparation.