Auto Buying Glossary

Click on one of these common car terms for a "plain English" explanation:

Acquisition Fee

A fee charged by your lending institution to cover the expenses incurred for things such as credit reports, insurance verification, and processing of the application. Back to Top

Amount Financed

The dollar amount of the credit that is provided to you by Provident Credit Union (or any other lender) to make your purchase. Back to Top

APR (Annual Percentage Rate)

The cost of a loan or other credit on an annual basis expressed as a percentage of the principal. This cost includes not only the interest on the loan, but may include other finance charges associated with obtaining the loan. Since Provident Credit Union does not have any such fees associated with obtaining an auto loan, the "interest rate" and the "APR" are equal. APR applies to vehicle loans but not to leases. Back to Top

Assignee

The bank, finance company or credit union that purchases the contract from the dealer. Back to Top

Base Price

The cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker. Back to Top

Capitalized Cost

The equivalent of the purchase price of a leased vehicle. Whereas a new car has a "price," a leased vehicle has a "capitalized cost" (the amount that accrues interest). Back to Top

Cap Cost Reduction

Any of a variety of ways to reduce the capitalized cost (see previous entry), such as a rebate, trade-in, or down payment. Back to Top

Captive Finance Company

A financial organization that is affiliated with an automotive manufacturer or distributor. General Motors Acceptance Corporation, or GMAC, is an example. (See Independent Leasing Company.) Back to Top

Closed-End Lease

A lease where the consumer is not liable for any changes in the vehicle's projected (residual) value at the end of the lease. The consumer is, however, liable for excessive wear and mileage. (See Open-End Lease.) Back to Top

Consumer Lease

A lease to an individual who intends to use the vehicle primarily for personal, family, or household use, rather than for business. A consumer lease can have a total contractual obligation of no more than $25,000. Back to Top

Co-Signer

The person who signs on a credit agreement in addition to the primary applicant. This person is legally responsible for repayment of the debt. Back to Top

Credit Insurance

Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. As with most contract terms, the cost of optional credit insurance must be disclosed in writing and, if you want it, you must agree to it and sign for it. Provident Credit Union offers something similar to credit insurance called Credit Protection. Credit Protection is technically not insurance, but will cancel your required monthly payments and waive finance charges for a fixed period and/or cancel outstanding debt in the event of certain predefined occurrences (such as death, disability, or unemployment). See Provident's Supplemental Coverage page for more details. Back to Top

Credit Bureau(s)

A company that produces, maintains, and provides credit histories on consumers and businesses. Back to Top

Credit Protection

Optional protection available with your Provident Credit Union auto loan which will cancel your required monthly payments and waive finance charges for a fixed period and/or cancel outstanding debt in the event of certain predefined occurrences (such as death, disability, or unemployment). See Provident's Supplemental Coverage page for more details. Back to Top

Credit Report

A 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. You can request to see yours online by going to annualcreditreport.com. Back to Top

Dealer Discount

Any amount with which the dealer reduces the manufacturer's suggested retail price. Back to Top

Dealer Sticker Price

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

Depreciation

A vehicle's decline in value over a period of time. Back to Top

Disposition Fee

A fee charged by most lessors to cover the expense of preparing and reselling (or auctioning) a leased vehicle at the end of its lease. Also known as Termination Fee. Back to Top

Document Fee

A fee charged by some dealers to cover the cost of preparing lease documents. Back to Top

Down Payment

The initial amount you pay to the dealer or lessor to reduce the amount you need to finance on the vehicle. Back to Top

Extended Service Contract

Optional protection on specified mechanical and electrical components of the vehicle available for purchase to supplement the warranty coverage provided with the new or used vehicle. Provident Credit Union provides this in the form of Mechanical Breakdown Insurance (MBI). See Provident's Supplemental Coverage page for more details. Back to Top

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 (see). By comparing this information to the patterns in millions of past credit reports, the score identifies your level of future credit risk.

While FICO scores are numbers used for comparison purposes, much more comprehensive credit reports are also used to determine credit worthiness. Back to Top

Finance Charge

The total cost of credit over the life of the loan. Back to Top

Fixed Rate Financing

The finance rate remains the same over the life of the contract. All Provident Credit Union auto loans come with fixed rate financing. Back to Top

GAP (Guaranteed Auto Protection)

Optional protection that pays the difference between the amount you owe on your vehicle and the amount you receive from your insurance company if the vehicle is stolen or destroyed before you have satisfied your credit obligation. See Provident's Supplemental Coverage page for more details. Back to Top

Independent Leasing Company

A financial organization that leases vehicles but is not affiliated with an automotive manufacturer or distributor. (See Captive Finance Company.) Back to Top

Index Rate

A published interest rate that is used to determine the actual rate charged with a variable rate loan, such as the "Prime Rate" as published in the Wall Street Journal. Back to Top

Initiation Fee

(See Acquisition Fee.) Back to Top

Invoice Price

The manufacturer's initial charge to the dealer. This usually is higher than the dealer's final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you're buying a car based on the invoice price (for example, "at invoice," "$100 below invoice," "two percent above invoice"), and if freight is already included, make sure freight isn't added again to the sales contract. Back to Top

Lessee

The person or company leasing the car from the dealership. Back to Top

Lessor

The company that leases the vehicle to the consumer. Back to Top

Margin

The percentage added to the index rate to determine the final rate (a.k.a. the "fully indexed rate") of a variable rate loan. Back to Top

Monroney Sticker Price

See MSRP, below. Back to Top

MSRP (Manufacturer's Suggested Retail Price)

Also known as "sticker price" or "Monroney Sticker Price." MSRP is what the vehicle manufacturer determines is the value of the car at retail. In the majority of situations, the vehicle sells for less than the MSRP. However, it can sell for more than the MSRP if the vehicle is in particularly high demand. The "Monroney Sticker", a label on the car window, is required by federal law, and may be removed only by the purchaser. It 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). Back to Top

MBI (Mechanical Breakdown Insurance)

A type of extended service contract offered by Provident, with a cost that is often half of what a dealer will charge for the similar coverage. See Provident's Supplemental Coverage page for more details. Back to Top

Monthly Payment Amount

The dollar amount due each month to repay the credit agreement. Back to Top

Negotiated Price of the Vehicle

The purchase price of the vehicle agreed upon by the buyer and the dealer. Back to Top

Open-End Lease

A lease where the consumer is liable for a shortfall between the vehicle's projected value (at lease inception) and its actual value (at lease end). (See Closed-End Lease.) Back to Top

Preparation Fee

A fee charged by the dealer or lessor to cover the incurred cost of readying the vehicle for pick up. Also known as "prep fee." Back to Top

Rent Charge

A lease's equivalent to a regular auto loan's interest. Back to Top

Residual Value

The estimated wholesale value of a leased vehicle at the end of the lease. It is used to determine your monthly payment. Back to Top

Single-Payment Lease

A lease where all payments are made in a single lump sum, rather than on a monthly basis. Generally, the consumer pays less interest this way than with a conventional lease. Back to Top

TAAL (Tax Advantage Auto Loan)

A special type of auto loan that Provident Credit Union offers. The Tax Advantage Auto Loan (TAAL) has the same rates as our regular Provident auto loans, with possible tax deductibility. Provident Credit Union places a courtesy lien on your home, but no equity or appraisal is required. You must currently own and occupy a home in California, and there is a $100 recording fee required. We recommend consulting with your tax advisor to determine whether the interest you pay is tax deductible (Provident cannot guarantee the tax deductible status of this loan). Back to Top

Terms

The agreed upon interest rate and repayment schedule arranged between creditor and borrower. Back to Top

Total Contractual Obligation

The sum of your down payment, trade-in, all monthly payments and any other fees, exclusive of deposits, taxes, and registration expenses. Back to Top

Trade-In Allowance

The value assigned to the vehicle you use as a trade. Back to Top

Truth In Lending Act

A law that requires a lender to disclose to borrowers certain types of payment information, interest rates, late payment information, and other terms of repayment. Back to Top

Variable Rate Financing

The finance rate varies and the amount you must pay each month changes over the life of the contract. The rate is a combination of the index rate and a previously disclosed margin. All Provident Credit Union auto loans come with fixed rate financing. Back to Top

Auto Resources Index