Common Auto Finance Terms
Common Finance Terms Explained | Eugene, OR
Are you a first-time car buyer? The financing process at any dealership can seem overwhelming at first. Here at Volvo Cars Eugene, we work with prospective buyers from all walks of life, with varying credit histories. We want every guest who conducts business with us to feel comfortable with the terms used on their auto loan so they can drive away confident in their new Volvo purchase. If you’ve never purchased a car from a dealership before or you just need a refresher, we’ve listed common terms that are found on our applications and paperwork (with their definitions) below.
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Financing
Similar to paying for a house over time, financing a vehicle allows owners the chance to make monthly payments until the model is paid in full. Financing is one option if you’d rather not pay all at once in cash.
Leasing
Leasing is a little different from financing. Both options allow you to make payments over time, but leasing is like renting rather than owning. The time period to make payments is typically shorter — usually 24-36 months — and at the end of your lease, you’ll need to return the vehicle or purchase it by paying for the remaining balance.
Term
Term means the length of time for a loan or lease.
Principal
Principal is the amount of the loan that you are paying off. This does not include interest.
Down Payment
The down payment is the lump sum of money that you’ll pay upfront to the dealer on your purchase or lease. We recommend making a large down payment — more than what’s required to purchase or lease the car.
Interest
Interest is the amount of money that the lender charges you for borrowing money.
Cash Back
Manufacturers will often have incentives that include cash back, or an amount of money that will be returned to you with your purchase. Cash back is also called a rebate, and you can use the money toward your down payment or receive it as a check.
Trade-in
If you have a current vehicle that you’d like to sell to us in exchange for one of our new or pre-owned vehicles, it will be referred to as a trade-in vehicle. It can lower the amount of your purchase or lease since we’d apply your trade-in model’s value toward your total cost.
Depreciation
Depreciation is the gradual loss of a vehicle’s original value. The process of depreciation begins when the vehicle is purchased and continues as long as the vehicle is in use.
Equity
Equity is the difference between your car’s value and how much you still owe on it. For example, if your vehicle is worth $35,000 and you still owe $10,000 on it, you have $25,000 in positive equity.
Upside Down
Being upside down on your auto loan happens when you owe more on your vehicle than the market value of that model. It’s also known as having negative equity in your car.
If you have questions about our finance process or if we can help clear up any of these or other financial terms that you don’t understand, please let us know. Give us a call, contact us online or stop by Volvo Cars Eugene at 89320 N Game Farm Road, Eugene, OR 97408, near Roseburg, Springfield, Coos Bay and Florence.