Are you preparing to purchase a vehicle? You've likely seen various terms related to the auto financing process that can seem confusing. To help you deepen your knowledge, we're going to share five common auto finance terminology to know about.
1. Debt-to-Income: This is a percentage that shows a borrower's monthly debt payments compared to their gross income. This is one factor used to determine your creditworthiness.
2. APR: This is a yearly interest rate that includes the total fees and expenses paid to acquire the loan.
3. Amortization: This is the repayment of the loan with regular installments to cover the principal and the interest.
4. Loan-to-Value: The loan amount divided by the car's value. The lender uses the loan-to-value to determine how much to lend a borrower.
5. Manufacturer's Suggested Retail Price (MSRP): The sale price recommended by the vehicle's manufacturer. This is also known as the list price you see when you go to the dealership.
