Auto Loan Lingo A-Z Part 2
written by Credit-HQ ExpertIn part 1 of this report, we began to sort out the various terms that are part of the automobile industry. Knowing what these terms mean will help you take control when you are ready to by a car or to have a car loan. One more thing, you should know the current state of your credit history if it is good or bad credit. Let’s finish our work of understanding the jargon of the car industry.
- Lease
Similar to a long-term rental that you work out with the dealer. You pay a monthly fee to use the car, which you then return or buy when the lease term is over.
- Lease Extension
A car lease is set up for a specific time frame and then the car is returned or purchased. A lease extension keeps the car in a leased state for a longer period of time.
- Lease-Like Loan
This is a loan that in many respects resembles a leasing agreement. But many of the lease fees are waved. When the contract period is over, the vehicle is paid off by the customer or returned to be sold to retire the outstanding balance.
- Manufacturer
The company like Ford, Mazda or Toyota that makes the cars that you buy at the dealership. Dealerships are generally independent and the manufacturer offers marketing, rebates and financing deals to help the dealers sell cars.
- Mileage Charge
There are mileage limits for each year you lease an auto. If you exceed those limits, you will pay this charge.
- Monroney Sticker
This is the sticker you see on the window of every car you look at when you are shopping at a dealership. It is required by the Automobile Information Discloser Act that this sticker reveals all significant statistics about the car including fuel economy, MSRP, the base price and any add ons that will effect that price. The name for that sticker was derived form the name of a senator from Oklahoma who wrote the law.
- Mop and Glow
A clever term for add on items that don’t improve the value of the car such as sealant for the paint job.
- MSRP
This is the price the manufacturer recommends for the car or the “Manufacturers Suggested Retail Price”.
- Open End Lease
A simplified lease agreement that stipulates that at the end of the lease term, the customer pays whoever difference there is between the book value of the car and the residual amount of value that their particular car retains.
- Rebate
A discount or a part of the sales price that is returned to the customer. Often set by the manufacturer as a marketing effort.
- Repossession
When a buyer takes out a loan from a dealership and then fails to make the payments, the dealership takes the car back and keeps all payments that have been made.
- Residual Value
An estimate of the value of a car at the end of a lease. The real market value is taken from the residual value which then dictates the fees that are paid at the end of a lease.
- Rule of 78’s
When a customer pays back their vehicle loan before the full term, this formula helps dealers know how much to refund of the interest and finance charges.
- Title
Like a deed shows you own a house, the title shows you are the legal owner of a new vehicle. A title is a legal document.
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