Vancouver Glossary Car Finance
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Learn everything you ever wanted to know about car loans and auto refinance. We understand that some terms can be often confusing, so we’ve put together a useful car loan glossary to better help you understand the industry language.
- Auto Equity Loan – Often referred to as a title loan, this type of loan uses the equity you have in your vehicle in exchange for your title. You receive a cash loan and upon repayment, the lender returns your car title.
- Balloon Payment – A balloon payment can make monthly payments lower on an auto loan but require a large payment to be made at the end of the car loan.
- Bill of Sale – A document prepared by the seller or dealership to record the details of a vehicle sale.
- Black Book – Similar to Kelley Blue Book, Black Book is a collection of information about the value of a car, truck or van. Black Book bases the value of the car on data collected from wholesale car auctions.
- Blue Book – Also referred to as Blue Book Value, this is the value of a vehicle as determined by Kelley Blue Book, Inc. Read more here.
- Buydown – When purchasing a new or used vehicle, the buyer may be offered an option to buydown the interest rate on their car loan.
- Cash Back Refi – A type of refinance loan that allows you to use the equity you have in your vehicle to get cashback while refinancing your car.
- Certificate of Title – A document provided by the Department of Motor Vehicles that proves ownership of a vehicle.
- Cosigner – An additional party who assumes equal responsibility for an auto loan.
- Credit – A term used to refer to your credit history, which may indicate whether you have the ability to repay an auto loan or not.
- Credit Bureau – A company or agency that keeps a record of your credit history.
- Credit History – A record of your financial relationships that allows lenders to determine your ability to repay loans.
- Credit Scoring System – A system used to determine a customer’s creditworthiness based on statistical data and credit history.
- Creditor – A lender that finances a loan.
- Creditworthiness – An individual’s ability to repay debts.
- Dealership – A company that is authorized to sell certain vehicles by the vehicle manufacturer.
- Debt-to-Income Ratio – Also known as DTI, this ratio expresses the percentage of a borrower’s debt compared to their total income.
- Default – Breaching a credit agreement, usually due to failure to repay based on the terms of the agreement.
- Delinquency – Making car loan payments late or past the due date.
- Depreciation – The gradual decline of a vehicle’s value due to age, wear and tear.
- Destination Charge: A fee charged to a dealership by the manufacturer for shipping a vehicle to their location. This fee is part of the MSRP or base sticker price of a vehicle.
- Disclosures – Any information about a vehicle’s history that is provided to a customer, which may include damages, repairs or title issues.
- Down Payment Money – required to lower the amount financed on an auto loan.
- Electronic Fund Transfer (EFT) Systems – An electronic method of transferring funds from one bank account to another.
- Equity – Based on funds you have paid on a loan, if your vehicle is valued at more than what you owe, you will have positive equity in your car.
- F&I Office – Also known as finance and insurance, the F&I office is where auto loan customers fill out their contract and paperwork at a dealership before taking delivery on a new or used vehicle.
- Finance Charge – The total amount of interest charges you will incur over the life of an auto loan.
- Grace Period – A period of time from a payment due date in which you can be late without being charged a penalty fee.
- Gross Monthly Income – The total monthly income of a borrower before any deductions have been removed such as insurance, child support and income tax.
- Interest – Also known as finance charges, this is the amount a lender charges to provide a car loan to a borrower.
- Interest Rate – Expressed as a percentage of 100, the annual rate of interest on an auto loan.
- Invoice Price – The amount a dealerships pays for a vehicle when purchasing from the manufacturer.
- Joint Account – An account with two parties who share equal responsibility to repay the loan.
- Late Payment – A car loan payment that has not been made on or before the due date.
- Lease – An alternative way to finance an automobile in which an individual borrows the vehicle for a period of time while the leasing company remains the owner of the vehicle.
- Lessee – The individual who has temporary use of a vehicle in a lease agreement.
- Lessor – The company that provides temporary use of a vehicle during a lease agreement.
- Lien – Ownership of a vehicle by a finance company until a debt has been repaid.
- List Price – The manufacturer’s suggested retail price for a vehicle. Also called “MSRP” or “sticker price.”
- Loan-to-Value Ratio – Also known as LTV, this ratio expresses the percentage of difference between a loan amount and a vehicle value.
- Mark-up -The difference between the invoice price and the sales price set by the dealer.
- Monroney Sticker – The price sticker required by federal law for all new vehicles. The Monroney Sticker lists all the vehicle’s options along with the manufacturer’s suggested retail price (MSRP).
- MSRP Manufacturer’s Suggested Retail Price – This price is the recommended selling price from the manufacturer and may change when options are added or removed from a vehicle.
- Net Income – A borrower’s total income minus federal and state taxes.
- Payment-to-Income Ratio – Also known as PTI, this ratio details the percentage of an individual’s income that an auto loan payment will require. Most lenders have a maximum PTI they will allow to avoid offering consumers loans they cannot repay.
- Poor Credit – Sometimes called bad credit, this is below-average credit, which may include late pays, repossessions, foreclosures, and bankruptcy. Poor credit does not mean you cannot be approved for an auto loan.
- Power of Attorney – A legal document authorizing one person to act on behalf of another.
- Proof of Income – Also known as POI, this includes pay stubs, employment verification and/or bank statements to prove a borrower’s income.
- Proof of Residence – Also known as POR, this includes utility bills, driver license, lease agreement or any other documentation that displays proof of a borrower’s residence.
- Refinancing – Financing an existing car loan with a new lender. This process is usually used when a borrower wants to lower their monthly payment, interest rate or change their auto loan term.
- Repossess – Repossession occurs when a customer defaults on an auto loan and has no intent to repay the debt. Auto finance companies reclaim the vehicle when a customer fails to meet their financial obligation.
- Service Charge – Charges that may include both costs incurred by the dealership to deliver the vehicle and the finance company to fund the loan.
- Servicing – The services and operations performed by a lender to the borrower during the life of a loan, such as collections, statements, and payment receipts.
- Sticker Price – The manufacturer’s suggested retail price for a vehicle. Also called “list price” or “MSRP.”
- Tax – The amount paid when purchasing a vehicle to satisfy state and other government tax requirements.
- Term – The amount of time during a loan from beginning to end, in which a borrower makes payments to repay the debt.
- Title Loan – A type of loan that uses the equity you have in your vehicle to lend you cash. The lender holds your title until the auto equity loan is paid in full.
- Trade-in Value – The value of a used vehicle that you trade into a dealership as part of a purchase.
- Upside-down – When a balance owed on a vehicle is more than the current value of that vehicle.
- Verification of Employment – A verbal or written verification of an individual’s employment. (source: www.roadloans.com)
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