Guide for new and used car buyers.
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Auto Moto Glossary

Actual Cash Value or wholesale value.

Adjusted Capitalized Cost
Also called Net Capitalized Cost. This is the "capitalized cost" (selling price), less deductions to reduce the price of the car, like down payment, non-cash credits, trade-in credit, and rebate. Adjusted cap cost is used to calculate your base monthly payment. Think of it as "amount financed".

Amount Financed
The amount of money that you borrow form the bank. The amount financed is equal to the vehicle price minus the down payment.

Anti-Lock Brakes
Brakes that automatically pump for you when you slam your foot on the brakes in an emergency stop. They may keep you from skidding while you try to turn to avoid an accident.

"As Is" Warranty
If you buy a car sold "as is," you must pay for any and all car repairs. There is no warranty. "As is" must be checked in the buyer's guide displayed in the car window at the dealership.

Less obvious area of dealer profit including financing, insurance, extended warranties and other add-ons.

Backdoor Money
Hidden manufacturer rebate that dealers get for selling a car.

Base Price
The cost of the car without options, but includes standard equipment and factory warranty.

Blue Book
The National Auto Dealers' Association's Used Car Book, listing estimated used car prices based on model, make, year and mileage. The pocket-sized blue book is actually orange.

Blue Book Value
Value of a vehicle as determined by a blue book guide. Blue books offer an estimate of what your vehicle is worth based on make, model, age, condition, etc.

Business Manager
Salesperson in the F&I department.

Buyer's Guide
A double sided form that the dealer fills out to tell you whether or not the vehicle comes with a warranty, and, if so, what the warranty includes. The Federal Trade Commission requires all dealerships to display the buyer's guide in the vehicle's window.

Capitalized Cost
The selling price of a car, option, warranty, insurance, rust proofing, or another goody. Think of this as the value of your car at the beginning of the lease, whereas the residual value is the value of the car at the end of the lease.

Credit Report
Historical report on the type, amount, frequency, and repayment of credit used by consumers and businesses. Under the FACT Act amendments to the Fair Credit Reporting Act, consumers are entitled to see one free copy of their credit report in a 12-month period.

An unlicensed professional used car seller who poses as a private individual selling his or her own car. Curbstoners sell used cars "at the curb," not at a dealership. They specialize in taking advantage of unschooled buyers.

A car dealer is anyone who sells more than five cars in a year. A dealer must be licensed and abide by all laws that apply to dealers.

Dealer Invoice
The price the dealer pays the manufacturer for the car.

Dealer Sticker Price
Usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer mark-up (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.

A car warranty usually specifies a "deductible" amount, an amount you must pay whenever you have a warranted part on your car repaired.

The reduced value of a car after you buy it. A brand new car can lose or "depreciate" between several hundred and several thousand dollars in value the minute you drive off the dealer's lot.

Down Payment
The amount of money you pay the car dealer up front. Any money you put into the down payment you donít have to borrow as a loan with interest. So, the more money you put down, the less you have to borrow.

Early Termination Fee
A very nasty penalty that you must pay if you terminate your lease early or total the car in a wreck. This could be several thousand dollars. Early lease termination should be avoided at all costs. Ending a lease is like ending a marriage. It's very painful and costs a lot of money. It's similar to a red neck divorce: somewhere, somehow, somebody's going to lose a trailer.

Excess Mileage
You are limited to 10,000 - 15,000 miles annually. Any more and you'll pay fines of 15 cents per mile. Watch the mileage, or you'll owe a lot at the end. An extra 2,000 miles a year on a 3 year lease could cost you $900. Don't pay for extra mileage up front, you won't get a refund if you don't drive excess miles. The dealers don't tell you about this little clause, it's buried in the writing, and by signing the lease, you effectively said that you read and understood everything.

Excess Wear & Tear
Damage or wear on the car beyond normal wear and tear. Many people are frustrated when hit with a large bill for "wear and tear" at the end of the lease, even if the car is in good condition. Read the lease and understand what it says about excess wear and tear. Have the dealer explain their standards of "excess" wear. Try to get out of paying a security deposit. The car must have four matching tires, or they'll bill you for four new tires at full retail.

Extended Warranty
An insurance policy on your vehicle, a safeguard against expensive, unforeseen repairs. They cover repairs and/or regular maintenance for an agreed-upon period of time. Extended warranties are better described as service contracts, since they cost extra and are sold separately unlike a warranty.

F&I Department
Finance and insurance department

Factory Invoice
The 'bill' that the dealer gets for a car. May not represent true cost.

FICO Score
Credit bureau scores are often called "FICO scores" because most credit bureau scores used in the US are produced from software developed by Fair, Isaac and Company (FICO). That score is calculated by a mathematical equation that evaluates many types of information that are in your credit report. By comparing this information to the patterns in millions of past credit reports, the score identifies your level of future credit risk.

Gap Insurance
If your leased car is stolen or totaled, your insurance will pay for the damage or loss. It won't help you make payments still owed to the leasing company. Gap insurance covers the gap, between the value of your car and the amount you still owe on your lease, including a possible penalty for early termination of the lease.

An amount the manufacturer pays the dealer each time the dealer sells its make. Also referred to as a "kickback."

Leases require huge insurance coverage: bodily injury or death liability: $100,000 per person / $300,000 per occurrence, property damage liability: $50,000, comprehensive & collision for full vehicle value with a maximum $500 deductible.

Invoice Price
The manufacturer's initial charge to the dealer. This is usually higher than the dealer's final cost because dealers often receive rebates, allowances, discounts, and incentive awards. The invoice price always includes freight (also known as destination and delivery).

A vehicle that is basically rented from a dealership for a set period of time with an option to buy the vehicle at the end of the lease period.

This is the person who has leased the vehicle.

The lessor is the party who is leasing the car to you. Even though the dealership is arranging the lease, the lessor is often a bank or the financial arm of a car manufacturer.

This is like long-term car rental. You make monthly payments for the opportunity to drive a car, but the leasing company owns it.

Market Value
Value of a vehicle in a particular market. What you should expect to pay/receive from a private seller/buyer.

Monthly Payment
The amount of money you are responsible to pay to the bank each month. With each monthly payment, you pay back part of the principal (the money you borrowed) and part of the interest.

Monroney Sticker Price
Shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage). It is a label affixed to the car window and is required by federal law. The label may not be removed by anyone other than the purchaser.

Manufacturers Suggested Retail Price.

These are extras you can have added to a standard vehicle, and usually come in packages. They often include air bags, anti-lock brakes, power locks and windows, rear wiper, rear defroster, and such comfort items as velour or leather seat coverings.

A legally binding document issued by the company to the policyholder which states the terms and conditions of the insurance.

The price of the policy, this may be a one-off payment or regular monthly installments.

Purchase Option Price
Selling price of the vehicle if you buy it at the end of the lease. This is usually the residual value.

An amount an insurer estimates to be the cost of providing a service based on the available information.

Residual Value
The value leasing companies estimated the car will be worth at lease end, expressed as % MSRP. The residual value affects the amount of your monthly payment. Dealers have books estimating the residual value and the higher the residual value, the less you will pay each month to lease your car. You may get lucky and it will be lower than market value when the lease is up. You can then buy and sell the car, trade it in for something else, or just walk away.

Meant to hold off body erosion, rustproofing is a popular extra on new cars. A type of rustproofing called galvanizing is used by manufacturers and comes with a new car. You'll pay extra for after market rustproofing, and there is controversy about its worth.

Sales Tax
Percent of your payment that goes to the government. Tax is paid in addition to the vehicle price. For this activity, enter the sales tax for your state. If your state has no sales tax, you must enter "0" in the sales tax window.

The time period of a loan or lease agreement.

The title shows a vehicle's ownership history. It is important to check the title of a used car and to contact past owners listed to verify the mileage and inquire about the car's maintenance.

Total Cost
In the end, the amount you pay for a new car is more than the vehicle price. The total cost of the vehicle includes the vehicle price, plus the interest on the loan, plus the sales tax.

Trade Difference
Bottom line price difference of new car minus trade-in.

Trade-in Allowance
Inflated figure made up of what the dealer actually buys your trade for plus the discount off the new car.

Trade-in Value
The value you may expect to be offered by a dealer when trading in your own used vehicle.

Upside Down Loan
A loan where you owe more on the car than it is worth. For example, if you have a loan on a car that is only worth (blue book value) $10,000 and the loan is for $15,000, that is an upside down loan.

All new and many used cars come with warranties. A warranty offers a guarantee that certain mechanical and body parts will be repaired if they aren't in proper working condition. The warranty is typically limited, so find out what the limitations are.

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