Auto Finance Dictionary

Paying for a car can feel difficult, stressful, and confusing. New to leasing a car? The world of auto finance can be difficult to understand and overwhelming if you aren't familiar with some of the basic terminology used by finance experts. We wanted to help alleviate some of that stress by breaking down the common auto finance and leasing terms to explain them in layman's terms. Do financial terms like APR, down payment, equity, and term make your head spin? We at Shuman Chrysler Dodge Jeep® Ram are experts in the leasing process, and we will be happy to walk you through the process of leasing or buying a vehicle. We've picked out some basic financial terms and defined them to help you become well-versed in the art of auto finance. Here are some terms that might come up during the process:

Leasing Terms and Glossary

Lease

When you lease a car, you are essentially renting it from the owner. Most lease contracts are for 3 years, during which you have low monthly payments and the latest technological developments but restricted mileage and customization

Drive-off Fees

Instead of a down payment, you will pay a number of fees to drive your lease off the lot. These typically include a security deposit, DMV fees, and leasing fees.

Early Termination

Your lease will be for an agreed upon amount of time. If you decide you want to turn in your lease early, you will be enacting what is called early termination, which will come at a penalty.

Excessive Wear and Tear

We don't expect you to return the lease in perfect condition. We understand that some general wear and tear will occur. However, your contract will have defined what excessive wear and tear is; you will have to pay for repairs that go beyond normal wear and tear when turning your lease in.

Lessee/Lessor

You as the person leasing the car are the lessee. The dealership, like Shuman Chrysler Dodge Jeep® Ram, is the lessor.

Mileage Allowance

Your lease contract will stipulate how many miles you can drive your car each year. If your mileage allowance is 12,000 miles a year for a three-year lease term, the car has to have fewer than 36,000 miles (12,000 miles* 3 years) when you turn it in, or you will have to pay a fee for each extra mile.

Additional Finance Terms and Glossary

APR

APR stands for Annual Percentage Rate, also known as Interest. If you buy a $25,000 car and get a loan with 5% APR, the actual price you are paying is $26,250, because you have to pay for the car and the interest of the loan.

Credit Score

Your credit score helps tell lenders if you are reliable. In order to obtain a good credit score, you must consistently make payments on time. Your good credit score shows that you will be a good person to lend money to.

Down Payment

A down payment is the money that you pay for your car upfront. Auto experts at Edmunds recommend that you save up enough money to put down 20% of the car's cost upfront. But they acknowledge that sometimes this number isn't realistic, due to increasing costs and static salaries.

Some people opt to put 0% down, so they don't have to shell out loads of cash all at once. The downside to that is that it usually comes with higher monthly payments and a higher APR.

Equity

The amount of money your car is worth after all debts have been paid off. For example, if you owe $10,000 more on your car, and it has a value of $15,000, you have $5,000 in equity.

Rebate

Many dealerships have special incentives and rebates for special circumstances, such as military personnel or recent college graduates. Be sure to ask our sales staff or financial advisors if you qualify for any special rebates.

Tax, Title Tag, and Registration

In general, when you purchase or lease a car, you will also have to purchase car insurance, the title that shows that you own the car, registration of the car with your local DMV, and sales tax. Every state has different regulations when it comes to the price of your tax, title, and other fees. Visit CarMax's fees calculator to see what your rates will be.

Term of the Loan

The amount of months it will take to pay off your loan. Some common loan terms are 36, 48, and 60 months. In general, if the term is shorter, you will have higher monthly payments but the car will be payed off sooner. If the term is longer, your monthly payments will be lower, but you will be paying them for a longer period of time.

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Contact

Shuman Chrysler Dodge Jeep Ram SRT

1111 South Commerce PO Box 125
Directions Walled Lake, MI 48390

  • Sales: (248) 560-7651
  • Service: (248) 560-7734
  • Parts: (248) 574-4462
  • Fax: (248) 669-2850

Hours

  • Monday 9:00am-9:00pm
  • Tuesday 9:00am-6:00pm
  • Wednesday 9:00am-6:00pm
  • Thursday 9:00am-9:00pm
  • Friday 9:00am-6:00pm
  • Saturday 10:00am-3:00pm
  • Sunday Closed
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