Walking into a car dealership to buy or lease a car should be a fun and worry free experience. But the reality is that when it comes time to actually sit down with the finance manager and fill out the vehicle’s loan documents to finalize the purchase, you may find yourself confused about some of the technical financial language you will encounter.
Becoming an educated and informed consumer is the best way to avoid such confusion. Here at Rick Case Mazda Duluth, we are committed to making the process of buying or leasing a new Mazda from our dealership as hassle-free as possible. So we put together the following glossary of key finance terms that you will usually come across when it’s time to sign your paperwork.
Annual Percentage Rate: Commonly referred to as “APR,” this rate is calculated by multiplying the interest rate times the number of periods in the year. For example: If an interest rate is figured quarterly at three percent, the APR would be 12 percent (4 X 3 = 12). Because the APR is standardized on a yearly basis, you can more easily compare your loan options.
Balance: Quite simply, this is the amount of money you are paying for the car when all factors, such as a down payment, trade-in, interest rate, and sales tax are calculated. The loan balance is reduced with each monthly payment until the loan is paid off in full.
Credit Score: This is also called a “FICO score,” and it’s what lending institutions use to determine your creditworthiness. Three major credit bureaus report items that can have either a positive or a negative impact on your score. The higher your credit rating, the easier it is to borrow money at a reduced interest rate. A score of 660 to 699 is considered to be average.
DMV Fees: You must pay various fees to your local Department of Motor Vehicles in order to register your vehicle. These are sometimes called title and license fees. Each state has its own requirements. But, generally speaking, the fees are based on the make, model, year, and mileage of the vehicle. You are usually given a temporary permit or “paper plate” to drive the vehicle until you can get it registered. You will also have to show proof of auto insurance. Contact your local DMV office for specific legal requirements in your area.
Down Payment: You have the option of decreasing the amount of money you are paying for your new car with a down payment. This is a cash amount that you provide up front which lowers the balance you will be financing. For example, if you are buying a $20,000 car, and putting down $5,000, the loan will be for $15,000. The more money you put down, the less money you will owe which can help to lower your monthly payment.
Finance: When you finance a vehicle, you are agreeing to borrow money from a lending institution which you pay off in regular monthly installments. The bank or lending institution retains ownership of the vehicle until the loan is paid in full.
Interest Rate: This is often a percentage of the total amount of the loan that a bank or lending institution will charge you for using their money. A high or low interest rate will have an impact on what you ultimately pay for your car during the term of the loan, over and above the sales price.
Lease: Just like renting a house, when you lease a vehicle it remains the property of the dealership. You pay a monthly fee to use the car for a certain period of time. Unlike a purchase, a lease gives you the option of turning the car back into the dealership and walking away from it. Or you may decide to purchase or lease another vehicle. Leases also have certain restrictions, such as mileage caps, that could result in additional fees if you go over them.
Lending Institution: Any company that loans money to individuals is called a “lending institution.” It can be a credit union, a bank, or even the auto manufacturer. Dealerships usually work with a number of different lending institutions when arranging auto loans. Sometimes you’ll hear the phrase “we carry our own paper,” which means the dealership has their own in-house financing.
Sales Tax: States and other government entities charge taxes based on a percentage of the purchase amount. The dealership is required by law to collect the sales tax on behalf of the government, which affects the amount you are financing.
Term: You are given a set amount of time to pay off your car loan. Typically, car loans and leases are for 36, 48 or 60 months. However, some loans may extend to 72 months or longer. A longer term will often lower the monthly payment.
Title: A title is a legal document that describes who owns the car. If you pay cash, the title will be made out in your name proving that you own it. If you finance your car, the bank or lending institution will be listed on the title as the owner. When you pay off the loan, the title is transferred to your name.
When It Comes to a Great Deal, We Speak Your Language
Our savings speak volumes at Rick Case Mazda Duluth, your preferred Mazda dealership in Atlanta, Georgia; serving Duluth and neighboring communities. Our Duluth Mazda dealership is your headquarters for outstanding deals on our entire inventory of new 2015 Mazdas. Stop by our dealership today and check out our wide selection of value-priced vehicles. We’re conveniently located at 2493 Pleasant Hill Road, Duluth, GA 30096. To contact our Sales Department, please call 888-552-8213. To reach our Service Department, please call 888-847-8592.