Car Buying Glossary
Don't let dealership jargon confuse you. Use our glossary to understand common automotive and finance terms.
APR (Annual Percentage Rate)
The yearly interest rate you pay on a car loan, including any fees charged by the lender.
As-Is
A vehicle sold without any warranty. The buyer assumes all responsibility for repairs once the sale is complete.
Bumper-to-Bumper Warranty
A comprehensive warranty that covers almost all components of a vehicle for a specific time or mileage.
Capitalized Cost (Cap Cost)
The negotiated selling price of a leased vehicle, plus any fees or taxes.
Dealer Prep Fee
A fee charged by the dealer for cleaning and preparing the car for delivery. Often negotiable.
Depreciation
The loss in value of a vehicle over time due to age, wear, and mileage.
Destination Charge
A non-negotiable fee charged by the manufacturer to transport the vehicle to the dealership.
Doc Fee (Documentation Fee)
A fee charged by the dealer to process the paperwork for a vehicle sale. In Florida, these can be high but are sometimes negotiable.
Down Payment
The upfront cash paid toward the purchase of a vehicle, which reduces the loan amount.
Equity
The difference between what a vehicle is worth and what you owe on it. If you owe less than it's worth, you have positive equity.
Extended Warranty
An optional service contract that covers certain repairs after the factory warranty expires.
GAP Insurance
Guaranteed Asset Protection. Covers the difference between the actual cash value of a vehicle and the balance still owed on the financing if the car is totaled.
Lemon Law
State laws that protect buyers who purchase a significantly defective new vehicle.
MSRP
Manufacturer's Suggested Retail Price. Also known as the sticker price.
Negative Equity (Underwater)
When you owe more on your car loan than the vehicle is currently worth.
Out-the-Door Price (OTD)
The total final price of the vehicle, including all taxes, fees, and accessories. This is the amount you actually pay.
Powertrain Warranty
A warranty that covers the engine, transmission, and drivetrain components.
Pre-Approval
A conditional commitment from a lender to give you a loan for a specific amount and interest rate before you shop.
Principal
The original amount of money borrowed for a loan, not including interest.
Residual Value
The estimated value of a vehicle at the end of a lease term.
Title
A legal document proving ownership of a vehicle.
Trade-In Value
The amount a dealer is willing to pay for your current vehicle to apply toward a new purchase.
VIN (Vehicle Identification Number)
A unique 17-character code used to identify a specific vehicle.
