APR. Annual Percentage Rate. The true interest rate being paid on an auto loan, taking into account all fees and other charges.

Captive Finance Companies. These subsidiaries of major auto companies, such as Ford Motor Credit and General Motors Acceptance Corp., make auto loans on the companies' brands. Often they have better rates than those offered by the dealership itself.

Credit Score. A numerical rendering of the likelihood that you will repay your bills based on your payment history and how much debt you owe. Your score determines what kind of interest rate you can qualify for.

Credit Report. A detailed summary of your bill-paying record and the basis for calculating your credit score.

Credit Reporting Agency. Organizations that compile and sell credit reports and scores to lenders who are making decisions on whether to grant loans.

Credit Union. A credit union is a member-owned cooperative that typically makes lower-rate auto loans than banks.

Home Equity Loan. A line of credit against your primary residence that could be used to buy a car. Unlike other loans, interest costs on this one would be deductible in calculating your taxes.

Incentives. A catchall term that includes rebates and low-interest loans that manufacturers use in attempting to sell a specific model.

MSRP. Stands for Manufacturer's Suggested Retail Price or full-list price. You should never pay MSRP for a new car except for the very hottest models.

Origination Fee. An add-on fee charged by a lender for making the loan. Often such fees are not accounted for if you get an interest-rate quotation that is not in APR terms.

Promotional Financing. Special low-interest deals (ranging from 0% to 4.9%) that manufacturers offer to sell slow-moving car models. Such deals will be financed through companies' "captive" finance arms such as Ford Motor Credit or General Motors Acceptance Corp. Often you have the option of taking a rebate instead of this financing.

LEASING

Capitalized Cost. The lease transaction's equivalent of the selling price. Payments are determined largely by the difference between the capitalized cost and the residual value (see below).

Capitalized Cost Reduction. Jargon for down payment in a lease transaction. You can use it as a way to reduce payments if, say, you have the proceeds from selling your old car.
Excess Mileage Charge. A penalty for driving more than the mileage allowance in the lease--typically around 12,000 miles a year. To avoid this penalty, make sure your lease has a mileage allowance matching your driving pattern.

Subvented Leases. Subsidized by the manufacturer, these leases are generally designed as a promotional effort to help move the vehicles. Often, these can be one of the best deals for the consumer considering leasing as an option.

Residual Value. What the vehicle will be worth at the end of the lease. It may or may not match true estimates of the used car value at that point. When a manufacturer wants to promote leasing of a certain model, it will lower payments by artificially boosting the residual value.


Source: http://search.msn.com
by Jerry Edgerton

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