Auto Finance Terms to Know
Purchasing a car is exciting, but navigating the choppy waters of loans, insurance, and documents can quickly become overwhelming. That’s why we put together this list of some of the key automotive finance terms you should know before you buy a vehicle.
MSRP: MSRP stands for Manufacturer Suggested Retail Price, and it’s what an automaker like Mitsubishi encourages dealership to charge for its vehicles. It’s worth keeping in mind that MSRP typically excludes destination fees — the cost of shipping the car to the dealership — taxes, additional fees, and any upgrades you choose to add.
Interest:If you — like most people — don’t have enough cash on hand to pay for a new car in full, you’ll need to take out a loan from your preferred financial institution. In return for borrowing that money, you’ll have to pay a small percentage of that balance back to the lender in the form of interest. If you agree to pay higher installments each month — known as a short-term loan — you’ll end up paying less in interest than if you extend payments over a longer time period.
APR: APR, or annual percentage rate, is closely related to the general interest rate. The main difference is that APR factors in fees like the cost of appraisals, processing, and origination — all of which are traditionally omitted from standard interest.
GAP Insurance: If you’re purchasing a brand-new vehicle or opting for a lease, you should consider acquiring GAP, or guaranteed asset protection, insurance. This optional policy will cover the difference between what you owe on a vehicle and its actual market value if it’s stolen or totaled. For instance, let’s assume that your Mitsubishi Outlander is currently worth $18,000 after depreciation, but you still owe $20,000. If it’s stolen or totaled, your standard insurance will only pay the $18,000, and you’ll be personally responsible for the difference. GAP insurance will pay the additional $2,000, taking some stress out of an already unfortunate situation.
Our finance experts at Atzenhoffer Mitsubishi are on-call to answer your questions, help you find a car loan that works for you, or set you up with insurance at a great price. Feel free to pay us a visit at our location right here in Victoria, TX.