Auto Financing Terminology

There are unique auto financing terms that one needs to familiarize themselves with if one has an interest in acquiring this kind of auto financing. This knowledge is of great help when negotiating a deal because you need to understand the lingo.

One commonly used word is M.S.R.P which stands for Manufacturer’s Suggested Retail Price. This basically means the original price that the retailer has placed on the particular automobile of interest, with no added options like security systems, and so on.

Another common terminology used in auto financing is Upside Down loan, which refers to a situation where someone is paying way more than an automobile’s market price. Term is another word that simply means the time period designated within which the auto loan should be cleared. A prepayment penalty is a fee imposed on someone, if they complete loan payment before the designated term.

Some of these terms you are most likely to hear from the dealers/sellers but do not necessarily affect you. Holdback is one such terminology which means, the money that the dealer receives from the manufacturer for selling an automobile within a given period. This period is most times, three months.

The manufacturer may go a step further and hand out a bonus or discount to a seller/dealer for a successful sale of their product i.e. automobile. This discount is known within the auto financing world, as backdoor money. This is the reason you are advised to bargain for a price that you feel comfortable with, because the dealer at most times inflates the price tags. At the back of your mind, always know that that seller is, running a business and a profit is his motivating force.

When someone takes a front-loaded loan, it means that you as the buyer have to pay a firsthand interest, which is then handed to the lender as his fee.


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