Before you go car shopping, you need to prepare. The sheer volume of unfamiliar terminology makes car buying a daunting task for most people. If you’re a car shopper looking for the best deal for the best car at the dealership or auction, you need to learn the terminology. You don’t necessarily have to become an expert on the car terminology, but you only need to familiarize yourself with these terms and their definitions. Our experts at Panama City Toyota want to share some of the car-buying terms you should know.
Financing
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Financing a car means that you’re borrowing money from a bank, online lender, credit union, finance company, or dealership to buy a car. For many people in the U.S., a car is a big purchase that requires several months or even years of saving.
According to the Federal Reserve Bank of New York, more than 35% of car buyers in the U.S. opted for a finance agreement in 2019 because they couldn’t afford to buy a car with cash. While this might be a startling statistic, financing enables Americans to drive a car despite being on a tight budget and with very little to save. That explains why car financing is the go-to option for many car buyers.
How exactly does car financing work? A financial institution lends you the exact amount of money you need to purchase a specific car. In exchange, you must pay the lender interest and any required fees to borrow that money over a given number of months.
Dealer-arranged financing is often better than bank financing because the dealer does everything for you. All you need to do is choose the car you want and fill out a credit application, then the dealer will submit it to multiple lenders. That allows you to compare rates and terms to settle for the best option.
Trade-In
Trade-in refers to the act of selling to a car dealership. You can do this as part of the negotiation when purchasing another car, or you can do it for cash and walk out from the dealership with money. If you decide to trade your vehicle in and buy another, the dealership will deduct the trade-in amount from the negotiated price of the new car.
The amount the dealership agrees to pay for your used car is your car’s trade-in value, and it’s usually less than the car’s market value. Most of the time, a dealer will determine your car’s price using the Blue Book Value.
Blue Book Value
As a car owner, you need to have an idea of your car’s worth before moving forward with a trade-in or selling your car to another person. Kelley Blue Book is the automotive industry’s renowned resource for this very task because it has been publishing the prices of well-known used vehicles since 1926. Dealers and private sellers use this resource to determine the value of a particular vehicle based on its year, model, make, mileage, features, equipment, and condition.
As-Is
There are several conditions you can purchase a car in. Most people think of the terms “new” and “used.” However, a third condition that might show up on a car’s price tag is “as-is.” That is a legal term used to describe a used car’s state when it is up for sale. If you see this tag on a vehicle, it simply means that it is being sold exactly the way it is, with all the issues known and unknown.
This term excludes the seller from legal recourse if the car develops an unexpected problem after the sale. When a vehicle is sold as-is, it comes with no warranty, meaning that if it has a problem, it’s no longer the seller’s responsibility. Therefore, the buyer must cover all the necessary repair costs.
An “as-is” purchase is risky for the car buyer. While you might save money during the sale, buying an “as-is” car could end up costing you a lot more than you expect in repair and maintenance costs. You need to conduct thorough research before moving forward with the purchase. It’s best to look up the car on the internet to confirm its typical selling price, problems, and reliability. That will help you set the right expectation for the car.
Annual Percentage Rate (APR)
Annual percentage rate, commonly referred to by its initial or finance rate, is the interest rate on a car loan that the lender charges you annually. Often, when someone talks about APR, they are talking about the percentage of the total amount you borrowed from the lender, distributed over 12 months, and usually applies to purchasing a car or an unpaid lease.
There are two types of APR: variable and fixed. If you have a fixed APR, you must make fixed monthly payments throughout the entire term of your car loan. If you have a variable APR, that means your monthly rates can fluctuate. In the U.S., variable APRs usually depend on the Federal funds rate established by the Federal Reserve. Any time the Federal government decides to adjust the interest rates across the nation, variable APRs for car loans will change accordingly.
Destination Charges
A destination charge is an unavoidable cost that the manufacturer charges for transporting a new car from the factory to the dealership. The destination fee is not negotiable and is usually not factored in the advertised manufacturer’s suggested retail price (or MSRP). The destination fee of different cars varies from one automaker to the other.
The dealer may include this cost in their pricing. However, as a car buyer, you should never pay any additional destination fee unless you’ve agreed to such a charge for a car that must travel a long distance from a given dealership.
Buying From Panama City Toyota
If you are looking for a new or used Toyota in Panama City, Florida, visit Panama City Toyota. Our experts are ready to help you choose the best car depending on your needs and budget. Contact us today to learn more about the car-buying terms you should know and our auto deals.
