Auto Loan Terms and Jargon:

Down Payment: The initial amount paid to reduce the auto financing amount.

Negotiated Price of the Vehicle: The purchase price of the vehicle agreed upon by both the buyer and the dealer.

Credit Insurance: Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. In most cases, you can obtain a cheaper rate by dealing directly with an insurance agent and thus avoiding added commission fees.

Extended Service Contract: Optional mechanical and electrical protection to supplement the warranty coverage.

Amount Financed: The dollar amount of the loan.

Assignee: The bank, finance company or credit union that awarded the auto financing loan.

Guaranteed Auto Protection (GAP): Optional protection that pays the difference between the amount you owe on your vehicle and the amount you receive from your insurance company if the vehicle is stolen or destroyed during the time you are making auto financing payments.


Annual Percentage Rate (APR): The cost of credit for one year expressed as a percentage.

Finance Charge: The fee you pay to use credit.

Fixed Rate Financing: The finance rate remains the same over the life of the contract.

Variable Rate Financing: The finance rate varies and the amount you pay may change over the life of the contract.

Monthly Payment Amount: The dollar amount due each month to repay the credit agreement.