Glossary - Car Financing Terms

S

Sticker Price:
The manufacturer's suggested retail price for a vehicle. Also called "List Price" or "MSRP."

Security:
Property pledged to the creditor in case of a default on a loan.

Servicing:
Servicing loans include collecting monthly payments, keeping records of loan progress, assuring payments of taxes and insurance etc.

T

Term:
The period of time between the beginning of a loan and the end. Most automobiles are financed in 36, 48, 60 and 72 month terms.

Title:
A document that gives evidence of an individual's ownership of property.

U

Upside-down:
Describes a situation where the balance owed on a loan is greater than the current value of a vehicle.

Unsecured Loan:
Advance of money that is not secured by collateral.

V

Verification of Employment:
A document signed by the borrower's employer verifying his/her position and salary.

Variable Interest Rate:
An interest rate which fluctuates up and down based on the rate index.

Vehicle Identification Number:
Vehicle identification number, or VIN, is a unique series of characters assigned to an automobile by the manufacturer. Since 1980, VINs have been standardized to be 17 characters in length.

W

Wraparound
Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Y

Yield:
The annual rate of return on an investment, expressed as a percentage.

Z

ZEV:
Refers to a zero emissions vehicle, such as an electric car, which does not produce any harmful emissions that could negatively impact the environment.

Zero Balance:
The wonderful appearance of a zero balance occurs when a borrower has paid of their loans and there is nothing left to repay.