Terms to Know

Pay-off

The amount you owe on the vehicle you are trading in.

Trade-in

Most dealerships will purchase from you -just about any vehicle (car, motorcycle, boat, camper van etc.) - whether the loan has been paid off or not. Don’t worry about having to sell your car before you're able to get a new one. You can do that right at the dealership. They will generally give you less than you would get if you sold it yourself. However, most people find this worth it, when you factor in the time it takes to sell a car privately.

Negative equity

Sometimes your trade-in may be worth less than a person owes the bank. Dealerships can generally still accommodate this by taking that negative balance and financing it on the new car.

Appraisal

The value of your vehicle - There are many factors that determine the value of a vehicle. It’s not an exact science, which is why you can get different valuations from different dealerships. It is helpful to go to a 3rd party website that values trades, so you have an independent comparison. If the dealership's trade-in valuation is lower than the 3rd party tool, ask them to justify why. Keep in mind that condition of vehicle, color, history of vehicle, and many other factors contribute to an actual valuation.

Net Price

The price you pay after rebates and incentives plus government taxes, fees, and doc fee.

Certified

A certified used vehicle is a vehicle that has passed a set of inspections, defined by a 3rd party, generally the manufacturer. If it's not certified, it doesn’t mean it's a bad vehicle. The vehicle just doesn’t meet the standards set forth in a checklist. For example, a certified vehicle may be required by the checklist to have a second key, and it doesn’t. Therefore, it's not certified.

EV

Electric Vehicle.

SUV

Sport Utility Vehicle.

Credit Score

This is a quick summary that the credit agencies put on your credit file. It allows lenders to make a quick general decision on what rate you should qualify for. It's a good idea to find out your credit score before you buy a car. This will allow you to have an idea of what interest rates you will pay.

Don’t be discouraged if you have a poor credit score, generally the dealership will have an option for you.

Credit Score rankings

FICO Score

Very poor: 300-579

Fair: 580-669

Good: 670-739

Very Good: 740-799

Exceptional: 800-850

Rebate

A discount that comes from the manufacturer. Many rebates don’t apply to every purchaser. It’s important to read the fine print in an advertisement to make sure you would qualify for the rebate.

Credit

Good credit, bad credit is all determined by your payment history. Lenders will request your credit file when you fill out a credit application from one or more of the credit reporting agencies.

Invoice

The invoice is the price dealers pay for the vehicle less any dealer incentives or rebates. A good way to find out if you are getting a good deal, is to ask the dealer if you can see the invoice.

Specials

Another term for this would be a deal/deals. Dealers often have special offers or incentives on their website to entice shoppers.

Repo

Repossession of a vehicle.

MSRP

Manufacturer Suggested Retail Price - This is the suggested price that the manufacturer feels you should pay for the vehicle.

Spot Delivery

In California, car dealerships are allowed to sell a car on the spot before the financing is completed. If they cannot live up to the terms, the customer has a right to return the vehicle for a full refund.

Right of Rescission

The spot delivery process in California gives dealers the ability to cancel the deal, as long as they notify a client within 72 hours.

Pre-qualified

Customers can choose to submit applications to banks before they take delivery. This is so that they know the exact terms that they will qualify for.

ITIN Car Financing

When a customer doesn’t have a social security number. When they have an ITIN number, a lot of times, they can still be financed.

Test Drive

It is a good idea to test a vehicle before you buy it. All dealerships will let you do this.

Down payment

Amount of money you plan to pay upfront, when purchasing the vehicle. Generally, people plan for 10% of the selling price of the vehicle. However, depending on your credit, you can put as little as $0 down.

APR

Also known as, Annual Percentage Rate, is the amount you will pay yearly to a bank for the loan. For example: 2.9% APR - If your loan balance is $10,000, you would pay approximately $290 to the bank each year for being able to borrow the money for your loan.

Depreciation

The older a car gets, the less it’s worth. Each year that passes, and mile that you drive, will make the car worth less money.

Equity

The amount of money that is owned by you, over any debt that is owed. For example, if your vehicle is worth $15,000, and you still owe the bank $10,000, then you have equity in the vehicle of $5,000.

Special Finance

When you have bad credit, dealerships have departments that specialize in helping you get a vehicle.