When you go out for a
car loan you must understand several loan terms. This is not only because you will gain knowledge and will know what the dealer is saying but also will be able to watch out for the things that dealers add up as
hidden costs in your contract. Several of the terms used in the Auto Loan world are listed below.
Assignee
These are the auto loan providers such as the credit unions, financial institutions and banks.
APR
Annual Percentage Rate, auto loan rate or
interest ratesis the money charged from you for using the lenders money.
Amount Financed
It is the amount of loan given to you.
Acceleration Clause
Watch out for this. It is used by the lenders for speeding up interest rates of the loan that is due.
Base Price
It is the price of car without dealer packages or extra car accessories but includes standard equipment.
Capitalized Cost
It includes car price, insurance, accessories and options, warranty, add-ons etc. Basically it is price that you will pay to get the car.
Captive Finance Company
These are the car manufactures that finance for a car.
Closed End Lease
In this lease you give back the car when the term is over and you can buy the car if you wish to.
Down Payment
Down payment is certain percentage of the loan that you pay in the beginning. It lowers your monthly payments.
Disposition Fee
This is the fee charged by the dealer if you want your trade in car to be disposed.
Dealer Sticker Price
This is the price of the car offered by the dealer which includes his installed features, additional dealer markups or profits, undercoating and preparation charges.
Early Termination Charges
If you want to pay the loan before the loan term finishes this fee is charged from you.
Extended Warranty
This warranty comes with extra payment and covers repairs after the original manufacturer or dealer warranty finishes.
Excess Wear and Tear
This is a lease term and you get charged with this fee if the wear and tear is beyond certain limit. Before you sign on the lease contract make sure to read what he means and will charge for this excessive wear and ear.
Excess Mileage Charge
In a lease you will have to keep your mileage below certain limit. If you cross this limit you will have to pay extra cost.
Finance Charges
These charges are to be paid by the consumer to the lender. It is calculated by subtracting the total payments fro the total amount of loan.
Fixed Rate Financing
In this type of loan the interest rate charged form you on each payment is same. There will be no rise and fall in it with the change in the market interest rate.
Gap Insurance
This insurance pays the difference between the amount given to you by the car insurance company and the amount you still have to pay to the lender when your car is destroyed or stolen.