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Common Auto Finance Terms | Lafayette LA | Near New Iberia, Abbeville, Youngsville & Broussard
Common Finance Terms Explained in Lafayette, LA
Ready to buy a new or used vehicle from Giles Nissan Lafayette? We’re thrilled to be able to help you get behind the wheel of your dream car. We make the process of financing or leasing a vehicle easy and efficient with complete transparency along every step of the way. There’s no reason to feel nervous about the process; our team is here to help. To assist you in preparing to meet with our finance experts, we compiled this list of common terms and definitions related to financing vehicles. Whether it’s your first time buying a car, or you just need a refresher, take a look below to learn the terminology of purchasing a vehicle.
Financing
If you can't pay the total cost of your vehicle in cash, financing allows you to pay for it over time. Typically, you will make monthly payments for a few years until you completely pay it off, at which point you own the vehicle.
Leasing
Leasing a vehicle is like leasing an apartment: You are renting it for a set period of time. Usually, leases are set for 24-36 months. Once your lease is up, you can either return the vehicle or purchase it.
Term
The term is the length of time covered by a loan or lease.
Principal
The principal is the loan amount you are paying off, not including interest.
Down Payment
The down payment is the amount you’ll pay upfront at the dealership. It is paid against the vehicle’s cost or lease. The down payment amount varies depending on your credit history and the terms of your agreement.
Interest
Interest refers to the amount the lender charges you for borrowing money.
APR
APR, or annual percentage rate, is the cost of your loan, including interest as well as other fees. It’s a more complete picture of what you’ll pay annually to take out a loan for the vehicle you’re interested in, as compared to interest alone. Not every fee will be included in the APR, so ask your lender for more details.
Cash Back
Vehicle manufacturers often offer cash back as an incentive for people to buy new vehicles. This cash is often referred to as a rebate, and you have the option to use it towards the down payment of a new car or receive it as a check after your purchase.
Trade-in
A trade-in occurs when you bring your current vehicle to a dealership and apply its value to the purchase or lease of a new vehicle. It can help significantly lower the cost, so definitely consider trading in your vehicle when you're ready to upgrade.
Depreciation
Depreciation is the loss of value a vehicle undergoes over time. Once it is driven off the dealer’s lot, depreciation begins, since the car has now gone from “new” to “used.” A car’s value after that point depends on its age, mileage and condition, but depreciation continues throughout its life.
Equity
Equity is the percentage of your vehicle that you own (as opposed to the part the bank still owns, since you’re paying it off). To calculate equity, subtract what you still owe on your vehicle from its value. For example, if your vehicle is worth $40,000 and you owe $10,000 on it, you have $30,000 in equity. Once you finish paying it off, you own 100% equity in your car.
Upside Down
If you’re “upside down” on your loan, you owe more on your vehicle than it’s worth. This is also referred to as “negative equity.”
If you have questions about our finance process, or if we can help clear up any of these or other financial terms that you don't understand, please let us know. Give us a call at 855-902-0003, contact us online or stop by Giles Nissan Lafayette at 6137 Johnston Street, Lafayette, LA 70503, near New Iberia, Abbeville, Youngsville and Broussard. We look forward to chatting with you!
