Auto Finance & Insurance Glossary

A one-time fee charged at the start of a lease to cover the lessor's administrative costs.

The yearly cost of a loan including interest and fees, expressed as a percentage.

A secured installment loan used to purchase a vehicle, with the car serving as collateral.

A short-term, high-interest loan secured by the title to your vehicle.

A large lump-sum payment due at the end of an otherwise low-payment loan.

Factory warranty covering most vehicle components — but never literally everything.

A dealership that finances its own customers — typically subprime — in-house.

The negotiated price of a leased vehicle — the lease equivalent of the purchase price.

A down payment on a lease that lowers the capitalized cost.

Someone who shares loan responsibility and ownership of the vehicle.

Someone who agrees to repay your loan if you default — and has no ownership of the vehicle.

Coverage for damage to your vehicle caused by hitting another car or object.

Coverage for non-collision damage: theft, vandalism, weather, fire, animal strikes.

A used vehicle inspected and warranty-backed by the original manufacturer.

A numerical summary (typically 300-850) of your credit history used by lenders.

A percentage of MSRP the manufacturer refunds to the dealer after the sale.

A charge dealers add above MSRP, common during shortages or on high-demand vehicles.

The amount you pay out of pocket on a claim before insurance kicks in.

A fee charged at lease-end to cover cleaning, inspection, and resale prep.

Cash you put toward a vehicle purchase, reducing the loan amount.

The percentage of your gross monthly income that goes toward debt payments.

A vehicle service contract that pays for certain repairs after the factory warranty expires.

The dealer office that handles loan paperwork and sells add-on products.

A 300-850 credit score model used by most lenders to evaluate auto loan applicants.

Guaranteed Asset Protection — pays the difference between what you owe and your car's value if it's totaled.

A credit inquiry that temporarily lowers your credit score by a few points.

The cost of borrowing money, expressed as a percentage of the principal.

The amount a dealer pays the manufacturer for a vehicle.

Purchasing your leased vehicle at the end of the lease (or earlier) for the predetermined residual value.

State laws that require manufacturers to refund or replace vehicles with repeated unfixable defects.

Coverage that pays for injury and property damage you cause to others.

The loan amount divided by the vehicle's value, expressed as a percentage.

The interest rate equivalent on a lease, expressed as a decimal.

The sticker price the manufacturer recommends a dealer charge for a vehicle.

A state where each driver's insurance pays their own medical bills regardless of fault.

Insurance that covers your own medical bills regardless of who caused the accident.

Factory warranty coverage for engine, transmission, and drivetrain components.

A lender's formal commitment to lend you a specific amount at a specific rate, contingent on final verification.

A soft-pull estimate of what a lender might approve you for.

The amount you pay (monthly, semi-annually, or annually) for insurance coverage.

A borrower with a credit score generally above 660 who qualifies for standard auto loan rates.

Recourse loans let the lender pursue you for any deficiency after repossession; non-recourse loans do not.

Replacing your current auto loan with a new loan at better terms.

The predetermined value of a leased vehicle at the end of the lease term.

A vehicle title indicating the car was declared a total loss by an insurer.

A credit inquiry that does not affect your credit score.

A loan made to a borrower with a credit score typically below 620.

A state where the at-fault driver's insurance pays for everyone's damages.

The amount a dealer offers for your current vehicle as credit toward a new one.

Coverage that pays when you're hit by a driver with no insurance or insufficient insurance.

When you owe more on your auto loan than the car is currently worth.