COMMON FINANCE TERMS

COMMON FINANCE TERMS

Actual Cash Value, or ACV, is the total value of the vehicle.

Adjusted Capitalized Cost is the selling price of the vehicle after considering reductions such as trade-in credit, down payment, and rebates.

Annual Percentage Rate, or APR, is the actual cost of the credit, or interest, owed by the borrower on an annual basis. APR is always written as a percentage.

Backend is the profit a seller makes on additional elements of the sale, including financing, warranties, insurance, and add-ons.

Borrower is the person responsible for paying back the loan as specified in the loan agreement.

Credit Report is a record of an individual's credit history and includes information concerning delinquent payments and bankruptcy.

Credit Score is a number value assigned to a person's credit history and is used by potential lenders to determine a person's credit-worthiness.

Down Payment is the amount a buyer pays at the point-of-sale.

MSRP, or Manufacturer's Suggested Retail Price, is the sticker-price of the vehicle suggested by the automaker.

Prepayment Penalty is a potential fee charged to borrowers who pay off their loan before the agreed-upon end date of the loan term.

Residual Value is any remaining value of the vehicle at the end of the loan term, when the vehicle has been entirely paid-off.

Term is the agreed-upon length of the loan repayment, usually written in terms of the number of months it will take to repay the loan.

Title is a legal document that records the ownership history of a particular vehicle and must be signed by the buyer at the time of the sale.

Upside-Down Loan is when you owe more money on your vehicle than the vehicle is actually worth.