If you’re thinking about financing a car, there are some terms you should know before you go into the dealership so you can be sure you understand what’s being said to you and get the best deal possible. Here are some common finance terms you should know before going to the dealership.
The manufacturer suggested retail price, which is often different from the actual price offered by the dealership after discounts and rebates.
Your credit score is going to be a huge determining factor in whether you qualify for a loan, how much money you qualify for, and what your interest rate will be. Check your credit score and make sure you can afford to finance a car before you do anything else.
APR stands for Annual Percentage Rate and determines how much interest the lender will add onto your loan each year. Ask your salesperson about APR deals and try to get it as low as possible. The higher the interest rate, the higher your monthly payment will be and the more money you’ll lose.
A down payment is a good thing to have, though many dealerships will let you buy a car for zero down. Down payments immediately pay off part of your car, reducing the amount of your loan and your monthly payment. Down payments can be anywhere from a few hundred to a few thousand dollars.
The loan term is the number of months you’ll spend paying off your vehicle. It can be 36, 48, or 60 months, though most are 48. Longer terms mean lower monthly payments but more money paid in interest in the end, and they’re difficult to get unless you have a very good credit score. The APR, loan term, and overall vehicle price after discounts determine your monthly payment.