A woman holds up a poster with the words learn the terms on it with APR in the background

10 Auto Loan Terms You Must Know

Milad Hassibi May 4, 2018


Just as with anything related to finance, banks and lenders use a wide variety of terms that can sound like a foreign language to most consumers. If you are in the market for a new car and are looking to purchase it through financing, there are a few key terms you need to be aware of:

Add-on interest– This is an interest rate that is calculated at the start of the auto loan. This amount is added on to your principal amount. Add-on interest must all be repaid, even if you decide to pay off the loan in full.

Amount due at singing- This is the total amount including down payment, fees, deposits etc. thatAn image of a woman who is writing down the key terms with a piece of paper you must pay to the dealer before you can drive off the lot in your new car.

Annual Percentage Rate (APR)– This is the interest rate charged on a loan on a yearly basis. If you wish to find out how much you pay in interest per month, simply divide this number by 12.

Base Price- This is the cost of the vehicle with no factory options. Essentially, this is the cheapest model that a dealer can offer. Base prices include all standard equipment but no options (such as premium audio or a sunroof).

Blue Book– This is a reference to Kelly Blue Book (KBB). The KBB value of the car, often referred to as the “blue book” value, is the fair market value of the car. Use this tool to ensure that you are getting the best price possible.

Extended Warranty– This is an additional agreement that you can purchase from your dealer. An extended warranty will cover the cost of any mechanical issues related to the car. Typically, you can get an extended warranty for up to 100,000+ miles.

Dealer Sticker Price– Often referred to as the sticker price, this is the cost of the vehicle including the base price and additional options (if any). This label will also tell your the fuel mileage of the car along with the retail price.

Prepayment Penalty– This is a penalty your lender will give you if you decide to pay off the loan amount

Get a Car Loan with Any Credit Along with a Happy Couple and a New Black SUV next to them

Title– The legal document that specifies ownership of a piece of property (usually a car).

Upside-Down– As a borrower, you are upside down on an auto loan when you owe more on the car than its fair market value. As an example, if you owe $7,500 on an auto loan that has a value of $6,700, you owe $1,200 more than the car is worth.

Final Note
All in all, it’s best to be prepared when you walk into your dealership looking for an auto loan. Being aware of the basic terminology that lenders use can give you an upper hand when it comes to negotiations.

If you are still shopping around for an auto loan with bad credit, CrediReady can help. Take a moment to fill out our free no-obligation form to find local lenders and dealers who can work with you and your credit score!



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