Glossary - Automotive and Finance Definitions

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  A
  Accessories
  Additional features and options that are available on a new car, beyond those that are included in the standard vehicle package. These may be installed either at the manufacturer or at the dealer.
   
  Accrued
  Interest that accrues on an unpaid balance of a loan.
   
  Acquisition Fee
  A fee included in most lease transactions that is either paid for up-front or included in the total cost of the vehicle. This fee covers a number of administrative costs, such as obtaining a credit report, verifying insurance coverage, etc.
   
  Adjusted Capitalized Cost
  The amount capitalized at the beginning of the lease, equal to the gross capitalized cost minus the capitalized cost reduction. This amount is sometimes referred to as the net cap cost.
   
  Advertising Fee
  The car dealer will pass this cost on to the buyer for advertising costs.
   
  Agreement Of Sale
  Also referred to as sales or purchase agreement. It states that the seller is selling and the buyer is buying.
   
  Amortization
  Payment of a loan obligation in a series of installments or transfers.
   
  Application
  An initial statement of personal and financial information required to approve your loan.
   
  APR (Annual Percentage Rate)
  The percentage of interest you pay for one year on the unpaid balance of a loan. APR applies to vehicle loans but not to leases.
   
  Assignment
  Any transfer of your loan from one lender to another.
   
  Auction
  The sale process by which multiple bidders compete to purchase a vehicle that is finally sold to the individual offering the highest price.
   
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  B
  Balloon Note
  At the end of the loan term, some of or the entire original loan amount is due and payable.
   
  Base Price
  The cost of a car without options, but including standard equipment, factory warranty, and freight. This price is printed on the Monrony sticker.
   
  Bid
  The amount of money offered for a vehicle in a sale.
   
  Bill Of Sale
  A document provided by a seller showing the name of the purchaser and purchase price, which is also used to calculate sales and other taxes.
   
  Black Book
  A biweekly guidebook on used car prices that summarize the most recent wholesale prices directly from auctions. Values often are extra clean, clean, average or rough; adjustments can be made for mileage, trim level, and optional equipment.
   
  Buy-Here, Pay-Here (BHPH)
  Dealer-provided financing to customers who are unable to obtain credit. BHPH dealers sell mechanically sound, affordable vehicles for which customers generally return to the dealership weekly or monthly to pay off the dealer-provided credit for their car.
   
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  C
  Capitalized Cost
  The equivalent of the purchase price of a leased vehicle. Whereas a new car has a "price," a leased vehicle has a "capitalized cost" (the amount that accrues interest).
   
  Captive Finance Company
  A financial organization that is affiliated with an automotive manufacturer or distributor. General Motors Acceptance Corporation, or GMAC, is an example.
   
  Capitalized Cost Reduction
  The amount paid in cash or trade-in at the inception of a lease, similar to a down payment.
   
  Certificate Of Origin
  A document that conveys the title of vehicle from the manufacturer to the dealer.
   
  Certificate of Title
  A legal document issued by the state showing the owners name and the vehicles mileage at the time of sale.
   
  Closed-End Lease
  A lease in which the lessee is not responsible for any difference between the actual and estimated residual value at the time of lease maturity. The lessee’s only extra obligations under a closed-end lease might be mileage or wear and tear exceeding the lease contract provisions.
   
  Co-Buy
  A Co-Buyers (Spouse) income is counted toward the buyer’s income.
   
  Commitment
  A legal binding agreement between a lender and a borrower.
   
  Compound Interest
  Interest paid on the principal and its accrued interest.
   
  Co-Signer
  This person assumes equal responsibility for the loan if the borrower does not pay.
   
  Creditworthiness
  The ability to repay loans or debts in the past or future.
   
  Credit Bureau
  A firm that provides credit and personal information to creditors.
   
  Credit History
  A document that shows borrowing and repayment of debts.
   
  Credit Profile
  The report showing your history of money borrowed and other financial obligations.
   
  Credit Report
  A credit document that shows credit or loan account, balances, employment and financial transactions.
   
  Credit Scoring
  Banks and lending institutions use different scoring systems to decide your creditworthiness.
   
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  D
  Dealer
  An individual licensed by the state to conduct the sale and purchase of new or used vehicles.
   
  Dealer Charges
  These changes are for options offered by the dealer.
   
  Dealer Debt Ratio
  Your earnings compared to how much you owe.
   
  Dealer Discount
  Any amount with which the dealer reduces the manufacturer's suggested retail price.
   
  Dealer Incentives
  Auto manufacturers offer programs to dealers to increase sales.
   
  Dealer Invoice
  The purchase price of the vehicle that the dealer is required to pay the manufacturer.
   
  Dealer Sticker Price
  Sticker price or MSRP is the total price of the vehicle.
   
  Disposition Fee
  A fee charged by the leasor to cover the expense of preparing and reselling (or auctioning) a leased vehicle at the end of its lease. Also known as Termination Fee.
   
  Delinquency
  Failure to make payments by the date the payment is due.
   
  Depreciation
  The value lost as the vehicle ages. During the early years of the vehicles life depreciation is usually rapid and can be greater or less than the average because of mileage and wear and tear.
   
  Destination Charge
  Shipping charges of the car that is passed on the buyer.
   
  Disclosure Statement
  The total amount of the loan; the loan amount, interest and other financial charges.
   
  Down Payment
  The cash you give to the dealer or leasor to reduce the vehicle's price.
   
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  E
  Equity
  The positive difference between the trade-in or market value of a vehicle and the loan payoff amount, in an installment sale of loan. The equity is the market value of the vehicle when the loan is paid off.
   
  Excess Mileage Charge
  A charge by the leasor for miles driven in excess of the maximum specified in the lease agreement. The excess mileage charge is usually between $0.10 and $0.25 per mile. For example, a lease specifies a maximum of 36,000 miles and a charge of $0.15 per mile over the maximum. If the lessee drives 37,000 miles, the excess mileage charge will be $0.15 x 1,000, or $150.
   
  Excess Wear and Tear
  Amount charged by a leasor to cover wear and tear on a leased vehicle beyond what is considered normal. The charge may cover both interior and exterior damage, such as upholstery stains, body dents and scrapes, and tire wear beyond the limits stated in the lease agreement.
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