What Auto Finance Terms Mean
If you’re planning to buy a car, you have a couple of different payment options. First, you can just pay for it outright. While it would be nice to drive home in a car you completely own, this is outside the budget of most drivers. Instead, you could finance the purchase, which involves borrowing money and paying it back over time. If this is the better choice for you, it’s time to look for a Honda dealer near me that offers financing. The Swickard Honda financing center in near Portland, OR will make sure you understand exactly how the process works. We’ll also go over terms you may be unfamiliar with, including:
Lender – The lender will give you the money to buy your car. It could be the dealership, but in most cases it’s a bank, credit union, or other financial institution.
Interest rate – When you borrow money, the lender will charge you a fee, that’s the interest. Your interest rate will be decided by different factors, with your credit score playing the biggest role.
Principal – This is the amount of money you borrow. Whatever your down payment is, the principal will be what’s left over.
Gap insurance – Gap insurance covers the depreciated value of a car and what is still owed on it in the event that it is totaled or stolen.
Term – This just refers to the length of the loan. Typically you can get a better interest rate with a shorter term, but the monthly payments are higher.
MSRP – This stands for Manufacturer’s Suggested Retail Price, also known as the sticker price you’ll see on a new car.