Auto Loan Learn the Terms

Car Talk
Below are some terms you may hear when shopping for a new or used vehicle or auto loan. Some words may have more than one meaning. Only those meanings relating to this site will be used.

Definitions A - Z

Dealer Preparation
(or dealer prep or preparation charges) An additional charge that dealers try to impose on buyers. It represents pure profit for the dealers, who have already been paid by the manufacturer for the cost of preparing the car for sale.

Dealer Sticker Price
Dealers will often add a sticker to the factory manufacturers suggested retail price (MSRP). Sometimes it even resembles the factory sticker, but now you know it is not. It is the dealer's asking price (suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating). Dealer sticker asking prices are almost always inflated. Inform the salesperson upfront that you will not be negotiating from the dealer's sticker, you will only negotiate from the invoice price.

Debit Card
This card allows you to access the money in your checking or savings account electronically to make purchases.

Debt
Something owed by one person to another that must be repaid, such as money borrowed, or goods, or services.

Debt Ratio
How much you earn compared with how much you owe. The lower your debt ratio, the more disposable income you have. You calculate it like this: Take the amount needed to repay debts each month, including rent or mortgage, and divide this by your gross pay (your pay before deduction of tax).

Debt to Income Ratio
The percentage of gross monthly income that goes toward paying for your monthly housing expense, installment debts, alimony, child support, car payments, and payments on revolving or open ended accounts such as credit cards.

Default
Failure to perform a legal obligation. A default includes failure to make the payments on a financial obligation, but may also be a failure to perform some action or service that is non monetary (not relating to money).

Delinquent
1. When you, the borrower, fails to make a payment on the due date on a debt, loan agreement or any other financial obligation, the account becomes delinquent and late fees may be charged.
2. A young person who commits an illegal act that is against the law. This could affect the persons credit report and possibly a rejection of a loan application. There is no time limit for consumer reporting companies to report and leave information about criminal convictions in a persons credit report.

Depreciation
A decrease in the price or value of something, such as a vehicle, over a period of time caused by use, age, wear and tear, mileage or other causes.

Dicker
To talk with another or others to reach an agreement towards a good deal. Same as bargaining, haggling, or negotiating. Example: you dicker with the car salesman or auto dealer when trying to get the best possible price for the vehicle you are wanting to buy. Be patient, shop around, compare costs and terms and dicker for the best deal.

Direct Lender
Originates loans directly to consumers, a bank, credit union, etc.

Disclosure
Information that must be released to you about your financial dealings that is required by law, such as terms, fees, finance charges and conditions associated with a loan or credit card agreement, etc.

Discrimination
Treating people different or unfair because of their race, color, national origin, sex, age, religion, disability or other personal characteristics covered by law. Unfair discrimination is prohibited by law.

Down Payment
A portion of the purchase price paid up front, that is paid in cash by the buyer to reduce the amount financed.

Driving Record
Also called Motor Vehicle Record (MVR) or Driver Record. A record that contains information about an automobile driver's traffic violations and accidents.

SCAMS & FRAUD
Some Scams, Fraud, and Consumer Abuse Items in the News

Federal Laws
Major Laws That Govern Financial Institutions & Protect Individuals in Their Financial Dealings

Organizations

Fannie Mae
Freddie Mac
Ginnie Mae
Nellie Mae
Sallie Mae

Consumer Info

Consumer Tips
Credit Bureau
Credit Insurance
Credit Report
Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
Repair Your Bad Credit
Truth in Lending Act
Borrowers Beware

Miscellaneous

Private Mortgage Insurance (PMI)
Prepayment Penalty

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