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Common Car Financing Terms To Know

• Bad Credit Loan - Auto loans that are granted to buyers with "bad" or "poor" credit (usually FICO scores below 600).
• Debt-to-Income Radio - Percentage of borrower debt compared to their annual income.
• Depreciation - Decline of a vehicle's resale value due to age, wear, and projected used car values.
• Down Payment - Money paid by borrower at the beginning of the contract to lower the overall finance amount on the vehicle.
• Equity - Value of the vehicle compared to the money you put into the loan. Positive equity refers to a vehicle resale value that is higher than the loan balance. Negative equity refers to a loan balance that is higher than the value of the vehicle.
• Interest Rate - Annual rate of interest or finance charges on a car loan.
• MSRP - Manufacturer's Suggest Retail Price.
• Principal - Total amount owed on an auto loan, less interest.
• Term - Time, usually in months, in which a borrower must make car finance payments.
• Trade-in Value - Estimated value of your vehicle when trading it in for a new or used car at the dealership. Use our Kansas City trade-in value tool to see how much you can get for your vehicle.