Car buying terms, explained

A fee some leasing companies charge to set up your lease. It's paid at signing or added to the lease balance, and either way it should be listed in your lease papers.

What a dealer, insurer, or other buyer says your car is worth in cash today. Expect different numbers from different buyers, since each judges condition and the market its own way.

Extras the dealer sells with the car, like protection packages, VIN etching, trackers, accessories, or service contracts. Dealers often push them because they're a big profit source, and you don't have to pay for any you didn't agree to buy.

The yearly cost of a loan, including interest and certain fees. It's the best single number for comparing loans, and it can be higher than the loan's interest rate.

A large final payment due at the end of some loans, after smaller monthly payments. Your payment schedule shows the amount and due date.

Sales slang for asking you to raise your offer, payment, or down payment. It doesn't tell you which number actually changed.

The interest rate a lender offers the dealer for your loan. The rate the dealer offers you can be higher, and some or all of the difference goes to the dealer.

The dealer's form listing the car, price, trade-in, fees, taxes, add-ons, and balance due. Its name varies, but its numbers should match your quote and your final contract.

The car's price in a lease, plus anything else added to the lease balance (the gross cap cost). Subtract your down payment, trade credit, or rebates and you get the adjusted cap cost, a main driver of your monthly payment.

The moment the salesperson asks you to commit or sign. Being asked doesn't mean you have to decide right now.

A used car sold under a "certified" program. What you get depends on who certifies it: a manufacturer program and a dealer's own label can be very different.

An unlicensed dealer who poses as a private seller. Warning signs: several cars for sale, a name that doesn't match the title, or excuses to skip the state title transfer.

The amount the manufacturer bills the dealer for the car. It's a reference point, not the dealer's true cost, because factory payments and incentives you can't see change the real number.

Money some manufacturers pay back to dealers, separate from the invoice price. Amounts vary, and it doesn't mean you're owed any particular price.

What a dealer earns for arranging your loan, often by charging you a higher rate than the lender's buy rate. Financing is a big profit source for dealers.

The manufacturer's fee for shipping a new car to the dealer, listed on the window sticker. Watch for a separate dealer fee with a similar name.

A fee some leases charge when you turn the car in at the end. The amount, and whether it can be waived, is in your lease contract.

A dealer fee for handling paperwork. Rules vary by state, so count it in the out-the-door total when you compare dealers.

Cash or credit you pay up front to lower the amount you borrow. Check that the contract shows the exact amount, listed separately from any trade-in credit, rebate, or fee.

A form some dealers use to list what they still owe you after the sale, like repairs, accessories, or a second key. Get each promise written down with a deadline and cost, and signed, before you sign the contract.

The difference between what your car is worth and what you still owe on it. Worth more than you owe is positive equity; owing more than it's worth is negative equity.

A usually optional contract that pays for certain repairs, sold separately from the car. It isn't the factory warranty, and coverage, exclusions, deductibles, and cancellation terms vary a lot.

The finance office where you sign the loan papers and get offered extras like service contracts and GAP. The loan and these products are big profit sources for dealers, so expect a sales pitch.

A loan dealers use to pay for the cars on their lot. A car that has sat a long time may mean more room to bargain, but it doesn't guarantee a discount.

A worksheet showing price, trade-in, down payment, and monthly payment in four boxes. Changing one box quietly moves the others, which makes it hard to see what you're really paying.

Usually optional coverage for the gap between what you owe and what your insurance pays if the car is stolen or totaled. It can be insurance or a waiver added to your loan, and limits, exclusions, and refund rules vary by contract.

A contract to use a car for a set time and mileage, then return it or buy it. Your lease papers must show key numbers like amount due at signing, monthly payment, total of payments, cap cost, residual value, rent charge, mileage limits, and early-ending costs.

How much you're borrowing compared with what the car is worth. Ask the lender which car value and loan amount it used.

An extra amount the dealer adds above the sticker price (MSRP), often on popular models. It's dealer markup you can negotiate, not a tax or government fee.

A per-mile charge at lease end for driving more than your allowance. The rate, and whether you can buy extra miles up front, is in your lease.

The small decimal that sets a lease's finance charge (the rent charge). Multiply it by 2,400 for a rough interest rate: a money factor of 0.0025 is about 6%.

The price the manufacturer suggests for a new car, shown on the window sticker. It's a starting point, not a promise; you might pay more or less.

Owing more on your car than it's worth. If you trade it in, you either pay that amount off or, if the lender approves, it gets added to your new loan.

Changing, disconnecting, or lying about a car's odometer so it shows fewer miles. NHTSA estimates more than 450,000 vehicles are sold each year with false odometer readings.

The total price before financing: the car plus dealer add-ons, fees, taxes, and government charges. It's the best number for comparing dealers, but it leaves out loan costs, so check the APR and total of payments too.

Slipping add-ons or worse loan terms into the monthly payment without showing each price. Dealers often focus on the monthly payment because it hides the total cost.

An inspection by an independent mechanic you choose, before you buy a used car. It can find problems that a title record, history report, certification, or test drive misses.

A fee some loans charge if you pay them off early. Your contract says whether yours has one, and state rules vary.

An incentive that lowers your price if you qualify. Who qualifies, when it ends, and whether it combines with special financing all vary.

A title brand for a salvage car that's been repaired and passed the state's checks. It doesn't prove the repairs were done well, and inspection, insurance, and registration rules vary by state.

A manufacturer fix for a safety defect, under NHTSA oversight. A history report isn't enough; check the exact VIN on NHTSA's recall lookup.

What the car is expected to be worth at lease end, used to figure your monthly payment. The price to buy the car at lease end is listed separately and can differ.

A title brand for a car that was badly damaged or declared a total loss, under that state's rules. Rules for repairing, registering, and insuring it vary by state.

Taking the car home before the dealer's financing is final. If the dealer says the financing fell through and pushes a new deal, often at a higher rate, you don't have to accept it: you can cancel and ask for your down payment and trade-in back.

A factory bonus some dealers earn for hitting sales targets. You can't see where a dealer stands, so a month-end date doesn't guarantee a better deal.

How long you have to pay off the loan, such as 60 or 72 months. A longer term lowers the monthly payment, but you'll usually pay more interest overall and can owe more than the car is worth for longer.

Being told you must buy a warranty, GAP, or another add-on to get approved or get a certain rate. In most cases these products are optional.

The state record showing who owns the car, any loan on it (a lien), and any brands like salvage or flood. Transfer rules vary by state.

Removing a damage brand from a car's title, often by retitling it in another state or using false papers, so the car looks like it has a clean history.

A tax break some states give when you trade in a car: you pay sales tax only on the price minus your trade-in's value. Whether you get it, and how it works, depends on your state.

Your current car, used as credit toward the next one. The trade credit, loan payoff, any equity, and any tax effect should each be a separate line.

A car with a previous owner or prior use. Its warranty, title history, recalls, and condition each need their own check.

A report of records a company has collected on a car. NMVTIS reports cover state title brands, the last reported mileage, and certain salvage and insurance total-loss records, but not full accident or repair history, current condition, or recalls.

The car's unique 17-character ID number, standard on vehicles built since 1981. You'll find it on the dashboard (look through the windshield on the driver's side) and on the driver's door frame.

The required label on a new car showing the manufacturer's suggested price, equipment, and other details. A separate dealer sticker (an addendum) can add dealer items or markup.