Loan Glossary
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Annual percentage rate (APR).
A simple loan rate, such as 6.5%, familiar to anyone who has taken out a loan or mortgaged a home.
It represents the percentage of the loan amount that you will pay annually for the privilege of borrowing the money.
Lease price.
The total cost of leasing the vehicle, excluding the down payment (monthly charges multiplied by the term).
Residual value.
The projected market value of a vehicle at the end of the lease, used to determine the cost of the lease at the time of negotiation.
Amount financed.
The loan amount, the amount you are borrowing from the lender (vehicle price plus sales tax minus down payment and trade-in value).
Down payment.
A lump payment, typically in cash, that reduces the amount required to finance the purchase or lease of a vehicle. In leasing, a down payment is also referred to as a “capitalized cost reduction,” where the capitalized cost is akin to the vehicle price in a loan scenario.
Total cost to own.
Compares the total spent to own the vehicle, including down payment and trade-in value; in leasing, this total also includes the residual value of the vehicle. Acquisition fees, destination charges, tag, title, and other fees and incentives are not included in this calculation, which is an estimate only.
This comparison ignores an important consideration: what you do with the money you save during the course of the loan or lease. Because leases typically demand lower up-front and monthly costs compared with financing, they can leave more money in the hands of the lessee. If you invest this money in a high-interest venture, it can tip the scales in the favor of leasing.
Total spent.
The sum of costs (total monthly payments plus down payment and trade-in value).
One Response to “Loan Glossary”
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October 27th, 2007 at 10:08 pm
This glossary is realy useful.