Auto Finance Directory

Terms to Know When Buying or Leasing

Does it ever feel like car dealerships have a whole other lingo that they use to talk, and you don't understand a single word? Buying or leasing a car can be frightening for that very reason. You might not be sure if you're getting slipped any extra fees or even just understanding your sales representative when you don't even speak the same language. Here is some basic terminology that might come in handy next time you go to buy or lease a vehicle.

Annual Percentage Rate (APR): You might hear the word “APR” a lot without knowing what it means. This is just the interest rate on the loan you take out to buy a vehicle. You might also hear it called a finance rate.

Acquisition Fee: Dealerships will often add on this addition upfront cost when you lease a vehicle in order to cover any processing costs.

Capitalization Cost: The total cost of a vehicle. Dealerships will use to “cap cost” to calculate the monthly payments you owe on your leased vehicle.

Cap Cost Reduction: The equivalent to a down payment, except on a leased vehicle. However much you pay upfront will reduce your monthly payments.

Depreciation: What you get after you subtract the residual value from the cap cost. Down Payment: The amount of money paid upfront when buying a new vehicle.

Lease Term: The amount of time that you are granted ownership of a leased vehicle, negotiated through a contract.

Manufacturer's Suggested Retail Price (MSRP): The industry standard price used as a guideline or base price by dealerships. The dealership may charge more than the MSRP.

Monthly Payment: The amount of money paid towards your car loan every month.

Quoted Dealer Price: The price of the vehicle according to the dealership. May line up with the MSRP or cost more.

Residual Value: A prediction of your leased vehicle's worth after the end of your lease term. This will also be used to calculate the amount of your monthly payments.