Common Car Buying Terms and Questions

Purchasing a vehicle requires you to do proper research about different models available before making any decision. You must understand the common car buying terms and questions. This will make things easier as you shop at different dealers. Some dealers may take advantage of buyers and inflate prices or sell them substandard cars. You can only be safe if you are aware of the common terms used in the auto industry.

As much as you may not understand all the technical terms, it is good to familiarize yourself with the language that's commonly used by car dealers and manufacturers. Here are a few common car terms and questions that are useful to know:

Acquisition Fee

The acquisition fee is a term commonly used when someone is leasing a car. Financial institutions usually require dealers to pay this fee so they can finance their customer's leases. The fee is automatically passed to the client and difficult to negotiate.

Blue Book Value

Bluebook value is generally used to calculate the trade-in value of a vehicle. It is a popular book with instructions on how to determine the price of used cars. The instructional book was first published in 1926 and can be used in calculating the value of almost every car model.

Annual Percentage Rate

Also known as the APR rate, the annual percentage rate is the interest charged on a vehicle loan. It is the percentage of the total amount borrowed calculated over one year.

Closed-End lease

This is the most common type of lease. After the agreed loan payment period (usually 36 months), the person who has leased the vehicle can decide to purchase it or return it to the dealer without any cost or liability.

Dealer Incentives

These are special discounts and deals given to dealers by vehicle manufacturers which are then extended to buyers. The incentives are more popular during seasonal sales.

Disposition Fee

This is a fee usually charged by financial institutions at the end of a lease to cover the servicing of the vehicle for another sale. This fee is rarely negotiated.

Down payment

This is the amount of money paid in cash for a vehicle before the auto loan is approved. The down payment amount will depend on individual lenders and dealerships.