When buying or leasing a car, there are several things to consider. We are here to help you with the buying process, beginning with the terms you will need to understand. Our Glossary lists common terms that you may hear when you are visiting the dealership. Take note of these, and you will be well-prepared for your visit.
APR: Annual Percentage Rate, which is the cost of credit (interest) paid by the consumer on an annual basis, expressed as a percentage.
Dealer Installed Option: Optional equipment that is installed by the dealer, rather than the manufacturer or an aftermarket installer. Dealer-installed options may include undercoating, fabric protection, appearance, performance or safety accessories, and any other item installed by the dealer before delivery.
Extended Warranty: An optional warranty policy that provides coverage against specified mechanical failures and defects over a specified number of miles, or by a specific time. They are called “extended” warranties because the new coverage period starts after the factory warranty has expired. This is a good option to consider, in order to cushion yourself against unforeseen repair costs.
F&I: Finance & Insurance Manager assist you with your new vehicle purchase by working out and processing the final paperwork with the dealership. The approximate time to allot for this part of the buying process is about an hour.
Hybrid: Vehicle that uses a combination of gasoline and electricity for power, so as to increase efficiency and thereby reduce emissions.
Optional equipment: This is listed on the window sticker and details what options are installed on this vehicle and how much they cost.
Payment Protection Plan: A form of insurance that protects the borrower in the event the borrower cannot make the payments due to financial hardship or unexpected circumstances.
VIN (Vehicle Identification Number): This is a unique code with 17 digit characters (includes both letters and numerals) that identifies your vehicle. Although its primary purpose is to identify your vehicle, it often contains important information concerning the equipment and options that were installed on your vehicle at the factory. This information allows us to order the correct parts for your vehicle.
A lease is simply a fixed, long-term contract where you essentially “rent” the car. The advantages of a lease are many, but the two key ones include: no down-payment is required; and you only pay for the portion of the vehicle that you use.
Buyers who lease will want to understand their driving behaviors – for example, make sure you would maximize driving mile at 10,000 to 12,000 a year, as there are fees for every mile beyond that.
When leasing, you are required to pay your first payment upfront. This is considered a security deposit, which is typically equal to your monthly payment and license fees.
Below, find some definitions to common terminology to help you navigate through the process:
Capitalized Cost or Lease Price: When you sit down and agree with the sales person on a price for a leased car, this becomes the capitalized cost, or “cap cost.” Cap cost is also known as lease price. If you haven’t fully paid off the vehicle you’re trading, cap cost would also include any remaining loan balance.
Closed-End Lease: In a closed-end car lease, you may return the car at the end of the lease and “walk away.” You also have an option to purchase the car at the end of the lease. The residual value of the car at the end of the lease had already been determined when you initially signed the lease. If you choose, you may pay the residual value of the car plus a processing fee, and the car is yours. This is the most popular type of car lease.
Open-End Lease: In an open-end lease, the market value of the car is determined at the end of the lease contract. This cost is then compared to the pre-determined residual value of the car, and when you turn in the car., you will pay the difference.
Depreciation: The difference between a vehicle’s original value and its value at lease-end (called residual value). Depreciation is the primary factor that determines the cost of leasing.
Down Payment: The amount of cash you put down to reduce the cost, which will then determine your monthly payments. It is subtracted from the car’s cost, before the monthly payment is calculated.
Gap Insurance: Insurance purchased to protect the car’s value if it is involved in an accident, thus reducing the value of the car. This insurance covers the difference between the new value of the car and what the customer owes for it.
Lease Term: The length of time a car is leased, usually expressed in number of months. Typical leases are 24, 36, or 48 months. If you plan on keeping a car longer, we may suggest buying the car rather than leasing.
Manufacturer’s Suggested Retail Price, or MSRP: MSRP is the full price for a vehicle as displayed on its window sticker, including optional packages. Dealer fees are not considered part of MSRP, although these charges are part of the overall cost of the vehicle.
Money Factor: The same interest that you would pay when buying a car. This interest is expressed as a money factor, sometimes called lease factor or factor.
Residual Value: The wholesale worth of a car at the end of its lease term, after it has depreciated. The higher the residual value, the more the car is worth at lease-end — and the lower your lease payments.
When preparing to buy a car you must also consider the insurance premium – it is there to provide protection against risk of injury. In fact, many of the new safety and technology features available in the latest car models provide an opportunity to save money on car insurance. You can save money also by bundling – bundle multiple vehicles or drivers from the same household, or, bundle your auto, life and home insurance from the same carrier.
Below are the key terms to know when requesting a quote or working with your insurance agent on a claim.
Bodily Injury Liability Coverage: This coverage pays for injuries to people involved in the accident other than the insured driver. This also can pay for legal defense fees, if sued.
Comprehensive Coverage: This coverage pays for the damage to your car when it is damaged and not in a collision. For example: fire, theft, vandalism, road kill, etc.
Collision Coverage: This coverage pays for damage when your car is in a collision with another car, motorcycle, pedestrian, or simply any object – even a shopping cart or fire hydrant.
Deductible: The amount you agree to pay out of pocket for each individual accident. Usually in increments of $100, $250 or $500. The higher the deductible, the lower your payment.
Medical Payments Coverage: This is an optional coverage you can add for medical and/or funeral expenses for covered persons that are payable resulting from an auto accident. Check out your health insurance plan to see if you are already covered under your medical plan, so you can avoid duplication.
Occasional Driver: This coverage is for someone who is insured but who is not the primary driver of the vehicle.
Personal Injury Protection Coverage: This is the basic coverage that is used in states with no-fault car insurance. The insurance company pays the medical, hospital and funeral coverage of insured persons in the insured vehicle, and any pedestrians hit by the insured vehicle.
Premium: The amount of money paid to the insurance company (Usually paid monthly, quarterly or every six (6) months). Many insurance companies offer a discount if paid monthly or pre-paid.
Property Damage Liability Coverage: This coverage is for damage to another’s property, and can also cover legal fees if you are sued.
Rental Reimbursement Coverage: This coverage provides a rental car if needed. Take a look at Zip Car, a leading provider of on-demand vehicles whose prices are based on real time usage. Check their daily fees versus the cost for Rental Reimbursement to see which is cheaper in your city.
Roadside Assistance Coverage: This coverage is great for towing, getting keys out of a locked car, battery jumps, and winter problems. You want to strongly consider having this insurance if you are single, have smaller children, work evening hours, or travel long distances regularly. But check for duplication of coverage. If you already have AAA or your car comes equipped with roadside assistance from the manufacturer, this coverage may not be necessary.
Uninsured Motorist Coverage: This coverage protects you up to the limit that you select, if an uninsured driver is legally responsible for the accident.
Underinsured Motorist Coverage: This coverage protects you up to the limit that you select, if an underinsured driver is legally responsible for the accident.
Vehicle Identification Number: The VIN number is the exclusive number for your exact car. It is a 17 digit alpha/numeric value that is used to identify the make, model and year of your vehicle.
If your car is in need of repair or you have been in an accident, below are terms you will want to be familiar with:
Betterment: This is a term used to describe an item replaced due to an accident that has some wear. The practice is often applied to tires and batteries. If a battery has used up 3/4 of its life, the insurance company will pro-rate the item’s cost and, for example, will pay one-quarter of the cost to replace the battery and will ask the insured or claimant to pay the remaining three-quarters.
Deductible: The amount for which the insured is liable on each loss before an insurance company will make payment.
Estimate: The best approximation of what the repair will cost. Collision repair is unique in that there are many unknown and sometimes hidden damages to the eye. After assembly, measurements, parts ordering and alignment readings are taken, costs can vary. Insurance companies expect this to occur and have billing guidelines in place that we follow to ensure complete payment for all repairs.
ESC or Electronic Stability Control: Operates like an invisible co-pilot detecting and virtually predicting danger. This driver assist function kicks in during sudden maneuvers to thee car – especially in inclement weather. ESC automatically brings the car under control resulting in fewer accidents and roll-overs.
Side Airbag: An inflatable cushion that fills the space between the door and the occupant to prevent head, torso and pelvis injuries when a vehicle is hit from the side. Side airbags may be stored in the door-trim panel or the outboard side of the seat; they may protect the hip and torso only or also protect the head. In some models, the inflatable tubular restraint is stored in the edge of the roof headliner and attached at the base of the A-pillar at the front end and above the doors, along the roofline, at the other. The device inflates into a somewhat stiff tube that prevents the occupant’s head from hitting the side pillar or the window.
Side-Impact: Safety regulations require that vehicles absorb a certain amount of force when hit from the side. To meet side-impact standards, automakers have stiffened side-impact beams, which resist intrusion into the passenger compartment, and added safety devices such as side airbags and extra padding, which are designed to push the occupant toward the interior of the vehicle and away from the point of intrusion.
Side-curtain airbags: Inflatable head protection bag that is stored in the side windows. Also referred to as a ‘head curtain airbag’, it covers the side windows of the vehicle in the front and back of a vehicle.
Side-impact airbags: An inflatable cushion that fills the space between the door and the occupant to prevent torso and pelvis injuries when a vehicle is hit from the side. Side airbags may be stored in the door-trim panel or the outboard side of the seat. In some models, the inflatable tubular restraint is stored in the edge of the roof headliner and attached at the base of the A-pillar at the front end and above the doors, along the roofline, at the other. The device inflates into a somewhat stiff tube that prevents the occupant’s head from hitting the side pillar or the window.
Anti-lock Braking System (ABS): Braking systems which sense wheel rotation and automatically “pump” the brakes for the driver in emergency braking conditions. The pumping and the prevention of wheel lockup allows you to retain steering capabilities during the braking emergency. Most of these systems work when you apply heavy, constant braking pressure, and do not work as well if the brakes are “pumped”.
Brake Caliper: A hydraulic (liquid-pressured) piston assembly that holds disc-brake pads.
Brake Pad: Used in a disc system, it is a replaceable piece of backing plate and additional friction lining. The disc, a thick, round metal plate located behind each wheel, against which a set of brake pads are applied by a caliper during braking.
Brake Rotor: Shiny metal disc that brake pads squeeze to stop the vehicle; hence the name disc brakes.
Disc Brakes: Shiny metal discs, called brake rotors, are attached to the wheel hub, rotating with the wheel. When the brake pedal is depressed, the brake calipers squeeze the discs to slow the vehicle. See Brake Caliper and Brake Rotor. Diameter given in millimeters.
Independent Suspension: A suspension design that lets each wheel move up and down independently of the others. A vehicle can have two-wheel or four-wheel independent suspension; sportier models have four-wheel independent suspension. See also Multi-Link Suspension, Live Axle.
Shock Absorber: A device that converts motion into heat, usually by forcing oil through small internal passages in a tubular housing. Used primarily to dampen suspension oscillations, shock absorbers respond to motion. Their effects, therefore, are most obvious in transient maneuvers.
Strut: A single, self-contained pivoting suspension unit that integrates a coil spring with a shock absorber. Struts are used on front-wheel drive automobiles. A suspension element in which a reinforced shock absorber is used as one of the wheels’ locating members, typically by solidly bolting the wheel hub to the bottom end of the strut.
Drivetrain: Vehicle components which act together to move the vehicle forward or backward. On a rear-drive vehicle, it is the combination of the engine, transmission, differential and drive shaft. On a front-drive vehicle, it consists of the engine, transaxle and drive axles.
Driveshaft: A long metal cylinder located between the transmission and the rear axle, in front-engine rear-wheel drive vehicles. The shaft is connected to the components on each end with a universal joint, which allows for movement up and down without bending the shaft.
Clutch: This drive train component is found between the engine and the transmission. It acts as a coupling device which is used to engage and disengage the transmission from the engine when shifting gears. It is necessary to do this joining and detaching because the engine is turning at a relatively high rate (thousands of revolutions per minute), and attempting to alter a gear ratio at this point could send various bits of transmission shrapnel careening about the occupant compartment.
Clutch Disk: Presses against the transmission flywheel to transfer power from the engine to the transmission.
Flywheel: A large disc bolted to the rear end of the crankshaft. The flywheel is encircled by a ring gear whose teeth are designed to mesh with the pinion gear in the starter during the process of starting the engine.
Limited-Slip Differential: A device that helps prevent the drive wheels from skidding or losing traction, by diverting power from the slipping wheel to the opposite wheel on the same axle.
Catalytic Converter: A component of the exhaust system that creates a heat-producing chemical reaction to convert potentially harmful combustion byproducts into carbon dioxide and water.
Muffler: A chamber in the engine exhaust system used to suppress exhaust noise and smooth exhaust pulsations.
Fan Belt: Transmits power from a crankshaft-driven pulley to an engine fan and other accessories.
Fuel Injector: Taking the place of carburetors in the 1980s, the fuel injector is an electrically controlled valve that delivers a precise amount of pressurized fuel into each combustion chamber.
Horsepower (hp, bhp): Abbreviated as hp, as in 200-hp engine, or bhp (brake horsepower or net horsepower) to designate power produced by an engine. In general, the higher the horsepower, the higher the vehicle’s top speed. One horsepower is the power needed to lift a 550-pound weight one foot in one second.
Octane: The hydrocarbon substance in gasoline that reduces engine knock or pinging, which is a noise caused by premature ignition of fuel in the cylinder combustion chamber. The higher the octane number, the less chance of premature ignition. High octane, which has a rating above 91, is useful only when recommended by the manufacturer.
Spark Plug: Converts voltage into an arc that passes between its electrodes; the arc ignites the fuel-air mixture in the combustion chamber. The mixture explodes, creating power by pushing down the piston.
Starter: An electric motor used to initiate movement of internal engine parts so that combustion can begin. Activating the starter causes the solenoid to thrust the pinion gear in the starter against the engine flywheel ring gear and begin turning it.
Torque: A measure of twisting force, given in foot-pounds (abbreviated as lb.-ft.) or Newton-meters (N-m). In the case of an automobile, it is the twisting or rotational force the engine exerts on the crankshaft. Vehicle specifications often include the maximum torque an engine produces at a specific number of revolutions. An engine that produces 200 lb.-ft. of torque at 3,000 revolutions per minute, or 200 lb.-ft. at 3,000 rpm, accelerates better at low speeds than an engine that provides 200 lb.-ft. at 5,000 rpm.
Turbocharger: Device that compresses and forces extra air into the intake manifold to produce extra power. Both turbochargers and superchargers are used to produce more power without increasing engine displacement, but neither are particularly fuel-efficient and both can require costly maintenance as vehicles age. By forcing fuel through the engine, this system allows the car to gather more speed.
V-Type Engine: In a V-6, V-8 or V-12 engine, the cylinders are divided into two banks, each of which is angled away from the other at the top, forming a ‘V’. Typically, this angle is 60 degrees on V-6 engines and 90 degrees on V-8 engines. From the rear, they are identified by having twin exhaust pipes, and by ear, have a deep rumble engine sound.