When financing your vehicle, you may run into a handful of terms exclusive to the finance department. To help translate, your team at Union Park Honda has put together a list of some of the most-used finance terms and what they mean.
Add-on interest: Add-on interest means that the overall amount of interest you’ll pay on the car is calculated at the beginning and factored into your monthly payment. This means the bank gets the full interest amount even if you pay the car off early.
Base price: The price of the car with only the basic equipment and no extras. This will be printed on the Monroney sticker along with the MSRP and the destination charge.
Destination charge: The cost of transporting the vehicle from the manufacturer to the dealership. Buyers pay this along with other charges like titling fees and appraisal fees.
Extended Warranty: This is a contract that continues to cover a set list of repairs or problems on a vehicle after the manufacturer's warranty has run out. You can usually buy an extended warranty from a dealership or a manufacturer at the end of the first year of ownership.
Incentives and rebates: Programs that may reduce the cost of the vehicle if the buyer meets certain criteria, like being a first-time buyer, a student, a veteran, etc. Ask if you qualify for any!
Invoice Price: This is the price that the manufacturer initially charges to the dealer. It includes in it the destination charge. However, the invoice price is not always the dealer's final cost, which may be affected by things like rebates and incentives.
Loan term: The length of your loan, usually between three and six years. The shorter the loan, the less interest you pay but the higher the monthly payment, and vice versa.
MSRP: Manufacturer suggested retail price. Depending on the dealership and what extras you add, you may pay more or less than the MSRP.
Payment Penalty: Sometimes loans come with a fee that a borrower must pay if they pay off the loan early. This is called a payment penalty. It’s good to find out whether or not your loan will come with a payment penalty before you sign the contract.
Title: A vehicle’s proof of ownership contains details about the car itself. The title of a car is used to transfer ownership from one person to another.
Trade-In Value: When you trade in an old car for a new one, a dealer will put the value of your old vehicle towards part of your new payment. This amount credited is called the car’s trade-in value, which often falls around 5 percent lower than the car’s wholesale value.
Are you looking for more information on financing your vehicle? Contact us or stop byUnion Park Honda today.