Before you take out a car loan, it’s a good idea to have some basic terminology down. As you talk to the professionals at Financing on the Pike, these auto loan terms will inevitably come up. Learn them now so you can move through your loan process in Mechanicsburg, Harrisburg, and Carlisle, PA, as smoothly as possible!
Annual Percentage Rate
Annual percentage rate is often referred to its abbreviation, APR. Basically, APR is the amount of interest on your total loan amount that you’ll be paying each year. The figure is calculated as an average over the full term of the loan.
You may be able to negotiate this figure with your lender, and when you do, you should try to get the lowest APR you can. A lower APR means lower monthly payments on your auto loan. Some factors that determine your APR are your credit history, market conditions, special offers from lenders, and current finance rates.
Extended Service Contract
An extended service contract can also be called an extended warranty, a service agreement, a service contract, or a maintenance agreement. It’s essentially a prolonged warranty offered to consumers in addition to the standard warranty. On your vehicle, this might include optional protection on specified electrical and mechanical components.
Negative equity is the amount of money owed on a car that’s above its market value. For example, you still might have to pay off $12,000 of your auto loan, but your car has depreciated to a market value of only $10,000. In this case, you would have a negative equity of $2,000.
If you want to trade in your vehicle, you or your dealer will have to pay off your negative equity. If the dealer promises to pay off your negative equity when you trade in your car, this $2,000 shouldn’t be included in your new loan. However, if your dealer won’t pay off your negative equity, it will be taken out of your new vehicle’s down payment or added to your new loan.
The negotiated price of the vehicle is the agreed-upon purchase price between the buyer and the seller of the car. Technically, this price should include any rebates, special offers, or discounts offered.
You’ll likely get to this figure by finding the balance between what the dealer paid for the vehicle and what other dealerships or sellers are offering as prices. Make sure to check the market value of the car before you agree to any figures. With some research and discussion with a trusted expert, you’ll learn what a good price is for the car you desire. Try to negotiate to that price or, even better, below.
Total of Payments
Total of payments is the total amount you’ll have paid for your vehicle after you’ve made all of the scheduled payments. It’s important to determine this precise figure so you have a clear understanding of the ultimate cost of your vehicle, given that you make all payments on time.
When you work us at Financing on the Pike, serving the Mechanicsburg, Harrisburg, and Carlisle areas, you can trust that we’ll help to guide you through the car loan process. Contact us today to learn more about how we can help you.