Music has its own language. As does the medical field, technology, types of sports, even food. And the car buying world is no different.
You may be familiar with the auto financing terms Annual Percentage Rate (APR), down payment and Manufacturer’s Suggested Retail Price (MSRP).
We’ve decided to cover some more auto-finance related key words that are good to know and will help get you up to speed on the lingo.
Credit Pull
You may have heard the phrases soft credit pull and hard credit pull. And prequalify versus preapproved. With auto loans through programs such as Drive®, these phrases show how they can be related. The big difference is that when you get prequalified for auto financing with Drive, it’s known as a soft credit pull. Meaning the prequalification process doesn’t have an impact on your credit score. With a preapproval, typically, a hard credit check is done and there can be an impact on your overall credit score. Since it does impact your credit, a preapproval also involves a customer giving express consent before a hard credit pull can be done.
Credit Report
A credit report is a personal snapshot of your credit history. Showing things like any bankruptcy filings or how you pay your bills, it plays a part in whether you can get credit for vehicle financing and helps determine the terms you receive.
Deficiency Balance
According to the Consumer Financial Protection Bureau (CFPB), deficiency balance relates to the process whereby “if your vehicle is repossessed and sold, you may be responsible for paying the difference between the amount left on your loan, plus repossession fees, and the sale price.”
Finance Calculator
When trying to figure out your budget and which car fits into your particular financial situation, financial calculators** can help you crunch the numbers and find the perfect ride. Our calculators can help you see how much you can afford, compare fuel costs with your current vehicle and a potential new one and work out early payoff details.
Kelley Blue Book (KBB.com)
This handy online guide can help you see how much a vehicle is worth. If you’re trying to research your current car’s value, make sure you are realistic about the condition of your vehicle when entering your information and keep in mind the valuation on this site is simply an estimate.
Loan-to-Value Ratio
Also known as LTV, this ratio is the total dollar value of your loan divided by the cash value of your vehicle. Usually expressed as a percentage, a down payment on a vehicle can reduce the loan-to-value ratio of an auto loan.
Servicing
The services and operations performed by a lender to the borrower during the life of a loan, such as collections, statements and payment receipts.
Upside-down
When a balance owed on a vehicle is more than the current value of that vehicle. This also is known as negative equity.
Understanding the above terms and others related to car buying can help you along, not just in your research and looking for a car to fit your budget, but even when it comes time to visit a dealership.
*These statements are informational only and should not be construed as legal, financial, tax or other professional advice.
**The referenced calculator is meant for educational and illustrative purposes only. The calculator estimates monthly payments solely based on the information you provide. We do not guarantee the availability of the illustrated terms or your eligibility for any product referenced. The estimated monthly payments generated from the calculator do not constitute a finance offer.
