Finance Terms

Buying a vehicle can be a stressful yet exciting time in someone's life.  To help relieve some of the anxiety of buying a vehicle, we have put together a list of terms you should be familiar with when purchasing a vehicle.

  • Annual Percentage Rate - this rate is computed as annual rate. Current market conditions and your credit history will help determine this rate.
  • Total payments - refers to the total number of payments that you will pay at the end of the term. This should be clearly defined and stipulated in the contract. This outlines your monthly payment schedule with corresponding amount.
  • Credit Report - refers to your credit history to all other banks and financial institutions. This contains information on your current loan with what bank and other credit obligations, past and current. It shows your payment record as well as missed payments. Credit report also discloses if you have been sued for delayed payments or have been filed complaint of.
  • Dealership Financing - is a financing option where the dealer finances the car for you. Both of you enter into an agreement and contract where you agree to pay the amount financed plus finance charge over a period of time. The dealer typically sells the contract to a bank, called assignee, and is the one who collects payments from you on a scheduled basis.
  • Direct Lending - is a financing option where you loan directly from a bank, credit union or other finance institutions. You and the lender enter into a contract where you agree to pay the loaned amount plus interest over a fixed period of time. The money obtained from this institution is used to pay for the vehicle.
  • Credit score - based from your credit file, this tells the lender the amount of risk they have to handle if they loan you money. Credit score tells a lot about your payment habits. The better your credit score, the higher the chance of your loan approval and better offers.
  • Term - the number of months you have to pay the loaned money from the bank. Take note that the longer the term, the higher the interest rate but the monthly obligation is lower. On the other hand, the shorter the term, the lower the interest rate, but the monthly obligation is higher.
  • Invoice price - the price of the vehicle charged by the manufacturer to the dealer which includes destination charge, normally passed on to the buyer without any increase. The invoice price is not necessarily the dealer's final vehicle price since the latter normally receives rebates and incentives from the manufacturer.
If you are unfamiliar with any of the terms, conditions, services or packages anytime during the finance process make sure ask the finance person to explain.  Remember there are no dumb questions.  It is important you understand what you are paying for and how long you will be paying for your new vehicle