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Definitions and Explanations
Interest Rate:
The periodic charge, expressed as a percentage, for the use of credit.
Loan Term:
The length of time that it will take to repay the loan. Typical loan terms are 60 to 180 months. Other terms may be available. Term length has a larger impact on the monthly payment and the final amount repaid than interest rates.
Purchase price:
The amount of money agreed upon by both parties as the value of the item for sale.
Down Payment:
The up-front cash payment that the buyer makes to reduce the amount borrowed to purchase a vehicle; the difference between the loan amount and the purchase price. A rebate also may be used as part of down payment. The down payment helps protect the bank, credit union or finance company in case the borrower defaults on the loan. A typical down payment is about 33 percent of the vehicle’s sale price.
Trade-in Value:
The amount a dealership credits you for the used vehicle you provide as partial payment for another vehicle. The amount credited is often about 5 percent below the vehicle’s wholesale market value.
Sales Tax:
A state, county and/or city surcharge added to the cost of certain items sold within a specific geographical area. This is usually a percentage of the total cost of a transaction, anywhere from 3% to 10%. Sales tax can vary greatly from county to county, due to county and/or city surcharges.
Vehicle Registration Fee:
A fee charged by the state to legally register the vehicle in that state. Some states charge a flat fee, while others base it on the specific vehicle registered. Also called a licensing fee.
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