Accrue : The accumulation of interest charges over time.

Add-Ons : Additional features or options available for a vehicle.

Adverse Action : The denial of credit or financing, either partially or in full, based on an applicant’s request.

Adverse Action Notice : A formal document explaining why a credit application has been denied.

Amortization : The process of repaying a loan through scheduled, periodic payments covering both principal and interest.

Amortization Table : A chart displaying the breakdown of loan payments, showing principal, interest, and remaining loan balance after each payment.

Amortization Term : The total duration of a loan repayment period, expressed in months (e.g., a 36-month term for a three-year loan).

Amount Financed : The total loan amount provided by a lender.

Annual Percentage Rate (APR) : The annualized cost of borrowing, including interest and fees, expressed as a percentage.

Application : A form containing an applicant’s personal and financial details used for credit assessment.

Asset : Any item of monetary value owned, including property, savings, and investments.

Auto Test Drive : A hands-on evaluation of a vehicle’s handling, performance, and comfort before purchase.

Bankrupt : A legal status where an individual is declared unable to repay debts.

Bankruptcy : A court proceeding in which a debtor’s financial obligations may be discharged or restructured.

Base Price : The manufacturer’s set price for a vehicle, excluding optional features and dealer additions.

Basis Point : A unit of measure for interest rates, where 1 basis point equals 0.01%.

Before-Tax Income :An individual’s income before deductions such as taxes.

Beneficiary : A person designated to receive benefits from a trust, estate, or insurance policy.

Black Book : A pricing guide used to determine a vehicle’s market value.

Book Value : The estimated value of a used vehicle based on market trends and appraisal guides like Kelley Blue Book.

Borrower : An individual who takes out a loan, agreeing to repay the principal and interest.

Branded Titles : Vehicle titles marked by state agencies to indicate specific conditions such as salvage, flood damage, or prior collisions.

Breach of Contract – Breach of Contract Broker : An intermediary who arranges transactions between buyers and sellers for a commission.

Buyer : The person purchasing a vehicle and assuming responsibility for the loan.

Cash Price: The full purchase price of a vehicle paid without financing.

Certificate of Title: A legal document proving vehicle ownership and detailing any liens.

Clear Title: A vehicle title without liens or legal disputes.

Co-Buyer: A person who jointly purchases a vehicle, sharing loan repayment responsibilities and ownership rights.

Co-Owner: A second individual who holds ownership rights to the vehicle.

Co-Signer: A person who agrees to take responsibility for a loan if the primary borrower fails to make payments.

Collateral: An asset pledged as security for a loan, subject to repossession if the borrower defaults.

Collection: Actions taken by a lender to recover overdue payments.

Collision Insurance: Coverage that pays for vehicle damage resulting from an accident.

Comprehensive Insurance: Coverage that protects against non-collision-related damages, such as theft, fire, or natural disasters.

Consumer Credit: Credit extended for personal or household purposes.

Credit: An arrangement allowing a borrower to receive goods or services now and pay later.

Credit Bureau: An organization that collects and maintains credit information (e.g., Equifax, Experian, TransUnion).

Credit Report: A document outlining an individual’s credit history and current debts.

Credit Score: A numerical rating that reflects a borrower’s creditworthiness.

Dealer Invoice: The price a dealer pays the manufacturer for a vehicle.

Dealer Sticker Price: The total price displayed on a vehicle, including base price and optional features.

Debt: Money owed to another party.

Default: Failure to meet the terms of a loan agreement, potentially leading to repossession.

Delinquent: A status indicating that a loan payment is past due.

Department of Motor Vehicles (DMV): A state agency responsible for vehicle registration and licensing.

Depreciation: The decrease in a vehicle’s value over time.

Destination Charge: The fee for transporting a vehicle from the manufacturer to the dealership.

Direct Financing: A loan obtained directly from a bank, credit union, or financial institution.

Down Payment: The upfront amount paid toward a vehicle’s purchase, reducing the amount financed.

Due Date: The date in a given month that a loan payment is due.

Duplicate Title: The request by an applicant to reissue a Certificate of Title when the original has been lost or destroyed.

Effective Gross Income: The normal annual income, including regular or guaranteed overtime. It may come from multiple sources, with salary being the primary source, though other stable and significant income may also qualify.

Electronic Funds Transfer (EFT): A process enabling the electronic transfer of funds or payments between bank accounts, either by the lender or the borrower.

Endorser: An individual who transfers their ownership interest to another party by signing relevant documents.

Equal Credit Opportunity Act (ECOA): A federal law that mandates equal access to credit without discrimination based on race, color, religion, national origin, age, sex, marital status, or income from public assistance programs.

Extended Warranty: A contract that provides coverage for specific repairs and breakdowns after the manufacturer’s warranty expires. It can be purchased from manufacturers or independent companies.

Fair Credit Reporting Act (FCRA): A consumer protection law regulating credit report disclosures by credit reporting agencies. It also establishes procedures for correcting inaccuracies in credit records.

Fair Market Value: The price a willing buyer would pay for a vehicle (or property) at a given time in a fair transaction.

Finance Charge: The total cost of consumer credit, expressed as a dollar amount.

Finance Company: A financial institution that provides loans for purchases, typically repaid in installments.

Fixed Rate Loan: A loan with an interest rate that remains unchanged for the entire repayment period.

Franchised Dealership: A dealership authorized by a manufacturer to sell its vehicles.

Guarantee of Title (GOT): A formal document ensuring the delivery of a properly completed Certificate of Title.

Guaranteed Automobile Protection (GAP): A financial product that covers the remaining loan balance after an insurance payout in the event of a total vehicle loss.

Guarantor: An individual who agrees to take financial responsibility for another person’s loan if they default.

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Indirect Financing: A loan initially arranged by a dealership and then transferred to a financial institution.

Inspection: A thorough mechanical and physical evaluation of a vehicle.

Installment Plan: A financing method where a vehicle is purchased on credit and paid off in scheduled payments over a set period.

Insurance: A financial agreement where an insurer assumes the risk of another party’s potential loss.

Insurance Premium: The payment made to an insurance company to maintain coverage.

Interest: The cost of borrowing money, typically expressed as a percentage of the loan amount.

Interest Rate: The percentage charged on a loan, forming part of the annual percentage rate (APR) and representing the lender’s return on the principal.

Invoice Price: See Dealer Invoice.

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Kelley Blue Book: See Book Value.

Late Fee: A charge imposed by a lender for payments made after the due date.

Lemon Law: A general term for state laws protecting consumers from purchasing persistently defective vehicles.

Lender: An entity or individual, such as a bank, credit union, or finance broker, that provides funds to borrowers under agreed repayment terms, including interest.

Liability Insurance: Coverage that protects the policyholder against claims for bodily injury or property damage up to a specified limit.

Lien: A legal claim on a vehicle or other property used as collateral to secure a loan.

Lien Holder: The individual or entity holding a financial interest in collateral to ensure loan repayment.

Lien Perfection: The legal process of ensuring the lien holder is properly recorded on the vehicle’s title.

Loan: A sum of money borrowed by a consumer to be repaid over time, usually with interest.

Loan Balance: The remaining amount owed on a loan after accounting for payments made.

Loan Contract: A formal agreement between borrower and lender outlining the loan terms.

Loan Term: The repayment period of a loan, usually measured in months (e.g., 24, 36, etc.). While a longer term results in lower monthly payments, it increases the total repayment amount due to accrued interest.

Loan-to-Value Ratio (LTV): A financial measure used to determine the loan amount relative to the vehicle’s value. It is calculated by dividing the loan amount by the retail value or Manufacturer’s Suggested Retail Price (MSRP).

Manufacturer: The company that produces a vehicle, such as Ford, Chevrolet, Honda, BMW, or Dodge.

Manufacturer's Rebate: See Rebate.

Manufacturer's Suggested Retail Price (MSRP): The price recommended by the manufacturer for a vehicle.

Maturity Date: The date when the remaining loan balance is due in full.

Monthly Payment: The required principal and interest payment made by the borrower each month.

Motor Club: An organization offering various services, including 24-hour roadside assistance, travel benefits, and maintenance reminders. Benefits vary by provider.

Non-Prime Lender: A financial institution that provides loans to individuals with a challenged credit history. Due to the higher risk, these loans typically come with elevated interest rates to offset potential losses.

Obligation: The legal duty of a borrower to repay a loan.

Options: Additional features added to a base model of a vehicle, such as a sunroof, automatic transmission, or bucket seats. Also referred to as add-ons.

Other Owner: A person listed on the vehicle title who is not responsible for the loan repayment but acknowledges the lender's security interest in the vehicle.

Preferred Placement Form: A document containing an individual’s financial details used to match them with the most suitable lender for their credit needs.

Principal: The loan amount before interest is applied; the sum being financed and subject to interest charges.

Principal Balance: The outstanding amount of a loan excluding interest.

Promise to Pay: A borrower’s commitment to make a payment by an agreed-upon date.

Qualify: Meeting a lender’s credit and financial requirements to obtain a loan.

Quote: An estimated cost for a product or service, such as a loan rate, insurance policy, or service contract.

Rate: The percentage of interest charged annually on a loan.

Rebate: A discount offered by a manufacturer to lower the purchase price of a vehicle, also known as a manufacturer’s rebate or customer incentive.

Regulation Z: A rule enforcing the Truth-In-Lending Act, requiring lenders to disclose credit terms transparently.

Retail Blue Book Value: The market value of a used vehicle in a specific area. See Book Value.

Retail Price: The price paid by the buyer to the seller for a vehicle.

Secured Loan: A loan backed by collateral.

Security: Assets or property pledged as collateral to secure a loan.

Security Interest: A lender’s legal claim on property used as collateral for a loan.

Service Contract: An agreement covering the costs of repairs or replacements within specified limits.

Simple Interest: An interest calculation method where the periodic interest rate is applied to the remaining loan balance daily, with payments first covering interest before reducing the principal.

Sticker Price: See Dealer Sticker Price.

Substitution of Collateral: Replacing an existing loan’s collateral with another item of comparable value.

Tax: A government-imposed percentage of the final sales price, payable to local, state, or federal entities.

Term: The duration of a loan, typically measured in months or years (e.g., a 36-month term for a 3-year loan).

Title: Legal proof of ownership for a vehicle. See Certificate of Title.

Total Sales Price: The complete cost of a financed purchase, including the down payment and total of all payments.

Trade-In: An exchange where a used vehicle is applied as credit toward the purchase of another vehicle.

Trade-In Allowance: The credit amount granted to a customer for their old vehicle, reducing the cost of a new purchase.

Truth-In-Lending Act: A federal law requiring lenders to disclose loan terms in a standardized format, making it easier for consumers to compare offers.

Underwriting: The process of evaluating financial data to approve a loan or insurance policy.

Usury Law: A law setting the maximum allowable interest rate on loans.

Usury Limit: The highest interest rate a lender can legally charge in a specific state.

Vehicle Identification Number (VIN): A unique 17-character alphanumeric code assigned by the manufacturer to identify a specific vehicle. It is typically located on the dashboard and visible through the windshield.

Warranty: A promise from the dealer or manufacturer ensuring that a vehicle or product will function as expected. Warranties typically cover specific mechanical issues for a set period or mileage limit.

Wholesale Book Value: The estimated price a dealership pays for a used vehicle in non-retail markets, such as auctions or broker transactions.

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