Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about New Auto Financing and other Auto Loans topics.
Understanding the terms of car financing can save you from paying more than you should for a new or used car. Familiarize yourself with the terminology outlined on a car loans and purchasing documents:
Annual Percentage Rate (APR) is the percentage of the amount borrowed charged in interest each year.
Down payment: the initial agreed amount to pay up front before acceptance of the car. Higher down payments represent minimal loan amount and payments.
Loan amount is the dollar value of the borrowed amount needed to make a purchase.
Monthly payment is the amount needed each month to pay the car note.
Payment period refers to the number of months necessary to satisfy the car loan
Sales price is the agreed amount to remit for the car
Trade-in value: the amount a dealer will deduct from the purchase of an old car in exchange for a newer model.
Total car cost is the sum of the monthly payments, the total of the down payment and the entire cost the car will actually cost. (This number may be significantly higher than the actual sales price.
|Jennifer Mathes, Ph.D.|