Glossary

When you're searching for a new vehicle and auto financing, it's important to know exactly what you're dealing with. Although Houston Auto Financing has made the process of finding an auto loan easier than ever, it still pays to be knowledgeable about it. If you plan on buying a vehicle soon, have a look at our helpful glossary of common auto financing terms:

• Amortization - The repayment of a loan by installments with consistent payments to cover the interest and principal.
• Annual Percentage Rate - The Annual Percentage Rate (APR) is a yearly rate of interest, expressed as a percentage, that includes all of the expenses and fees paid to acquire the loan.
• Base Price - The cost of a vehicle before the dealer adds options. Typically includes the standard equipment and manufacturer's warranty.
• Book Value - The value of a used vehicle in a specific market area, commonly provided by Kelley Blue Book or Black Book.
• Credit - Your credit represents your ability to borrow money from a lender. The better your credit, the more likely you can get approved for auto financing with a favorable APR.
• Dealer Invoice - The amount a dealer pays the manufacturer for a vehicle.
• Down Payment - The part of the purchase price that the buyer pays in cash and does not finance with a loan.
• Lender - Any financial institution, such as a bank or credit union, that loans money to borrowers.
• MSRP - Manufacturer's Suggested Retail Price. This is the recommended selling price for a vehicle, set by the manufacturer. Options added or removed from a vehicle may affect this price.
• Principal - The amount of auto financing without the interest factored in.
• Options - Also referred to as add-ons, these are extra features added to the base model.
• Term - The length of auto financing, typically between 36 and 72 months.
• Title - A legal document that proves one's ownership of property.
• Underwriting - The process of verifying data and approving financing.

Visit our FAQs page for answers to questions about financing your car.