Glossary

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  F
  Fair Market Value
  The current value of a particular vehicle in the marketplace, based on mileage, exterior and interior condition, mechanical fitness, etc.
   
  Franchised Dealer
  A licensed vehicle dealer authorized to sell and service a specific brand of new vehicles.
   
   
  G
  Gap Insurance
  A type of insurance covering the amount owed due to early termination of a lease agreement that is not covered by auto insurance. Involuntary early termination of a lease may occur when a car is stolen or significantly damaged in an accident. The actual cash value of the car paid by auto insurance may not be adequate to pay the lease payoff balance and early-termination penalties.
   
  Gross Income
  An individual's total personal income before taking deductions or taxes into account.
   
   
  I
  Incentives
  A form of reward offered to boost sales; a special price reduction or rebate from vehicle manufacturers to influence the sale of a particular model. Incentives can be low to zero percent.
   
  Independent Dealer
  A used vehicle dealer who is not associated with a manufacturer.
   
  Interest Rate
  The percentage of a sum of money charged for its use.
   
  K
  Kelly Blue Book
  A publication that lists retail prices and retail trade-in values of used vehicles.
   
  L
  Lease
  A contract between a leasor and a lessee for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.
   
  Lessee
  The company or individual to whom the vehicle is leased.
   
  Leasor
  The company that leases the vehicle to the consumer.
   
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  M
  Manufacturer's Rebate
  A program offered directly to the buyer by manufacturers to increase the sales of slow-selling models or to reduce excess inventories.
   
  Manufacturer's Suggested Retail Price (MSRP)
  Also known as "sticker price." MSRP is what the vehicle manufacturer determines is the value of the car at retail. Money Factor A percentage representing the cost of the money required to lease a vehicle, similar to the interest rate paid on a loan.
   
  P
  Preparation Fee
  A fee charged by the dealer or leasor to cover the incurred cost of readying the vehicle for pick up. Also known as "prep fee."
   
  Private Transaction
  When one consumer sells a vehicle to another consumer without the interaction of a car dealer.
   
  R
  Repossession
  When one consumer sells a vehicle to another consumer without the interaction of a car dealer.
   
  Residual Value
  The estimated wholesale value of a leased vehicle at the end of the lease. It is used to determine your monthly payment.
   
  Retail Price
  The price paid by a consumer to a dealer or individual for a vehicle. The dealer or individual sets the retail price of a used car by calculating the wholesale price paid plus reconditioning expenses and other costs.
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  S
  Sticker Price
  Required by federal law, the price which appears on a label affixed to the car window showing the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's freight or transportation charge, and the fuel economy (mileage). The label may not be removed by anyone other than the purchaser.
   
  Single-Payment Lease
  A lease where all payments are made in a single lump sum, rather than on a monthly basis. Generally, the consumer pays less interest this way than with a conventional lease.
   
  SUV
  Sports Utility Vehicle.
   
  T
  Term
  The length of time that a lessee will make payments on a loan. Typical car loans have terms of 24, 36 or 48 months.
   
  Total Contractual Obligation
  The sum of your down payment, trade-in, all monthly payments and any other fees, exclusive of deposits, taxes, and registration expenses.
   
  Trade-in Value
  The value assigned to the vehicle you use as a trade in. Amount credited is a wholesale value, which is thousands of dollars less than retail value.
   
  U
  Upside-Down
  When the value of a vehicle is lower than the outstanding balance of the loan secured by the vehicle.
   
  W
  Wholesaler
  A dealer who buys vehicles at auction or from a dealer or another wholesaler and resells them in the wholesale market, i.e., to dealers rather than consumers. Wholesalers also buy and sell cars among the dealers with whom they do business.
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