Buying a car is an exciting event; however, the financing aspect of it can sometimes be confusing. Here are some of the most common finance terms you may encounter while buying a car.
Blue Book. If you hear the phrase “blue book value,” this refers to Kelley Blue Book. This resource is a collection of information about the value of a car based on data collected from nationwide wholesale vehicle auctions.
Cosigner. This is an additional party who is equally responsible for an auto loan. A cosigner is sometimes required if a person has bad credit or not enough credit.
Credit. This refers to a buyer’s credit history and indicates his or her ability to replay an auto loan. Your credit is often given a score, and the higher the score, the better.
Depreciation. The gradual loss of a vehicle’s value due to wear and tear and age. Depreciation occurs rapidly within the first few years of car ownership and then tapers after that.
Finance Charge. How much interest you’ll have to pay for an auto loan.
Gross Monthly Income. The total amount of income a borrower receives before any deductions, including taxes.
Principal. The amount owed on a loan that does not include any interest.
Term. The total amount of time a borrower has to repay a loan with monthly payments, for example 60 months.
Title. A document that shows legal ownership of a vehicle.
Trade in Value. The amount of money a dealership will give you for your old car. This amount can be used to pay for your new vehicle and can reduce the amount you need to finance.
Upside down. If you are upside down in a loan, this means you owe more than the vehicle is worth. This is often due to depreciation.
Contact us at Credit Union Auto Buying Service if you need help understanding auto financing. We’re here to help you decipher the lingo and comprehend the terms of your loan.