Car Insurance

As if choosing a car you want was not complex enough, auto dealers with their ads use the misleading language of “Car Speak.” We have simplified the most used terms to help navigate your way to the best deal.

Add-on interest :: Is Interest that is calculated at the start of the loan, then is is added to the principal, not a legal disclosure, just a misleading amount. To be repaid even if the loan is paid off early.

Base price :: The car base cost without options. This price includes any standard equipment and the warranty and is listed on the M.S.R.P. sticker.

Blue Book :: Actually, Kelley Blue Book, a sales guide dealers use to compute wholesale and retail car pricing. “Blue Book” price can actually mean a price that is found in one of the guides to pricing. The books come in several hues. These are put out by many organizations, are available online and can be found in the reference sections of local libraries.

Car extended warranty :: A contract that covers some car repairs after the manufacturer’s warranty expires. Extended warranties are sold by dealers and independent companies. With a new car, the auto extended warranty from the dealer usually must be bought within a year of ownership.

Dealer holdback :: A reduction in price, usually between 2 and 3 percent of manufacturer’s price, that manufacturers pay dealers, usually quarterly. A holdback may allow the dealer a discount on the invoice price. A buyer could purchase a car below invoice price and still leave the dealer with a profit.

Dealer incentives :: Programs offered to increase the sales of slow moving models or as a means to reduce excess inventories by manufacturers. Dealers may keep or elect to pass on the incentives to the buyer.

Dealer preparation :: A charge that dealers try to inflict on buyers. It is pure profit. The dealers have already been paid for the cost of removing the packaging materials by the manufacturer.

Destination charge :: The price charged for transporting the car to the dealer from the factory or port of entry. This price is to be passed on without any markup.

Invoice price :: The maker’s initial charge to the dealer. The price won’t be the dealer’s cost because they receive rebates, other incentives and the infamous holdback from the manufacturer. The invoice price includes freight, known as the destination charge.

Monroney sticker :: Also known as M.S.R.P., Manufacturer’s Suggested Retail Price. The price sticker on the car window that includes base price, the manufacturer’s installed options, the destination charge, and the car’s fuel economy. Federal law requires this label. and it is removed only when the car is sold. It is named after A.S. “Mike” Monroney, an Oklahoma congressman who sponsored the Automobile Information Disclosure Act.

Prepayment penalty :: A lender’s penalty to the borrower for prepaying the loan before all the payments are made.

Rebate :: A manufacturer’s price reduction as an incentive to buyers. The rebates appeal to people with less-than-perfect credit. These are people who do not qualify for the best rate loan. These rebates also appeal to fist time buyers who do not have another car to trade in.

Rule of 78s :: A formula that was devised before modern calculators. It was a quick way to calculate payoff amounts when payments were made ahead on an loan. Still in use, the Rule of 78s is used to calculate a rebate of interest charges when paying off a precomputed loan. There is no worse way to calculate a payoff amount for a borrower looking to get out of a loan. The Rule of 78s packs extra interest charges in the early months. The Rule of 78s can be applied to calculated loans that are paid off early.