APR, MSRP, 0% for 48 Months or $5,000 Cash Allowance; Say What?

After hours of research and test-drives, you have finally found your dream vehicle.  Now it is time to talk finance and settle upon a price.  Unless you are a CPA, work for Kansas City used cars, a mortgage lender, or broker, when you find yourself sitting at the desk to haggle a price you might find yourself needing a translation dictionary.  And you thought choosing a dealer like Alberta Mazda and then deciding upon the vehicle to purchase was the hard part!  Print off the following finance terms and definitions before you find your head spinning with confusion.

Amount financed: how much your loan is

APR: Annual Percentage Rate, how much interest you will pay over the course of a year as a percentage of your amount financed.  This is how much it will cost you per year for a bank to give you money on credit. It is usually stated in association with the term of your loan.

Down payment: how much cash you will apply to the cost of your vehicle and the remaining balance is financed.

Equity: this can be negative or positive, and it’s the difference of your trade vehicle payoff less the value of the vehicle.  Someone with negative equity will refer to it as being “upside down” in their vehicle, meaning they owe more on their vehicle than it is worth.

Finance charge: the amount you pay your lending company to loan you money.

Lease: essentially you are renting the vehicle.  There will be a monthly payment and usually a limit on how many miles you can drive for the duration of the lease.

MSRP: manufacturer’s suggested retail price.  Usually you can negotiate a lower price, but sometimes you do pay “sticker price.”  Keep in mind this is the suggested price, and it is often unknown how much the dealer paid for the vehicle and actual sale prices will vary from consumer to consumer.

Rebate: an incentive offered by the dealer or manufacturer that will either lower the selling cost of the vehicle or be a financing deal for a term loan.

Term: refers to how many monthly payments it will take to payoff your vehicle loan.  Common loan terms are 36, 48, 60, and 72 months.  84 and 96 month term loans are available, but if it is going to take you 7-8 years to pay for a vehicle, perhaps you should find a lower cost vehicle.

Total sales price: total cost of your purchase.  This is based on vehicle purchase price, down payment, rebates, total amount financed, APR, and the term of your loan.