Car Loan Terms

 So you want a new car? The process of buying a new vehicle involves a lot of extra steps, ranging from selecting what you want out of a segment saturated with choices to negotiating the terms of your car loan. Loans can be tricky, and it's important you go into the process of buying a car armed with some basic knowledge of the lingo used by dealerships when negotiating contracts and monthly car loan payments.

Base Price: The entry-level cost of the vehicle before add-ons.

Blue Book: Though this term has its origins in "Kelley Blue Book," a publication used to estimate vehicle pricing, the term "Blue Book" can refer to any similar guide that helps dealers determine the cost of a vehicle.

Dealer Holdback: The discount given to the dealership by the manufacturer. Often, dealers will get a 2 to 3% discount off the retail price, so customers can negotiate lower than the MSRP without cutting into the dealership's profits.

Dealer Sticker Price: The cost of a vehicle according to the dealership. It's called the "sticker price" because it's displayed on a sticker and often can be found in a window of the vehicle in question. This may be lower or higher than the MSRP.

Destination Charge: The fee, added onto the cost of a vehicle, which is charged to cover the costs of transporting the vehicle from the manufacturer to the dealership.

Invoice Price: The cost charged to the dealership by the manufacturer. As stated before, this is often lower than the sticker price due to the manufacturer offering a dealer holdback in addition to various incentives.

Manufacturer's Suggested Retail Price (MSRP): The estimated retail price of a vehicle according to the manufacturer. Many dealerships use this as a guideline and may charge more or less.

Prepayment Penalty: If the borrower of a loan pays it off before the end of the loan term, this is an extra cost charged by the lender. It's important to note that not all loans include a prepayment penalty.

Title: A legal document that carries information regarding the vehicle, and is used to transfer ownership from one person to another.


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