Car Buyer’s Glossary of Terms | Everything you need to know in under 3 minutes

The auto market has its own language. So let’s review some key terms from the auto buyer’s glossary to give you the vocabulary of a pro.

Annual percentage rate

– the APR, is the percentage you’ll pay in one year to borrow money, including any financing fees and the interest rate,

calculated

out as an annual percentage. It’s an apples-to-apples way to compare how much it costs to take out a loan for a

new car

.

Blue Book value

– Kelley Blue Book, or kbb.com, assigns a widely accepted price estimate to every vehicle. It’s one tool to help you measure the value of a vehicle you want to buy or sell.

Dealer addendum sticker

– list the price of any extra features, which could raise the asking price above MSRP, or manufacturer’s suggested retail price.

Destination fee

– this is an unavoidable fee for transporting the vehicle from its assembly plant to the

dealership

.

Document fee

– a fee to cover paperwork processing. The amount varies by state and can be negotiated.

Drive off, the total amount you pay to take your new car home, whether

leasing

or buying.

F&I

– the finance and

insurance

office, is where you sign the paperwork. But you might face high pressure

sales tactics

to get you to add extras you don’t need.

Gap insurance

– gap insurance covers the difference between the value of the vehicle and the replacement cost. It’s an optional, but good choice.

Invoice price

– this is how much the

dealer

paid the manufacturer for the vehicle and good to know when you’re negotiating.

Monroney sticker

– required by law, this is the window sticker that shows you the MSRP, fuel mileage, country of origin, and other useful information.

MSRP

– the manufacturer’s suggested retail price, is what the automaker thinks the dealer should charge for the vehicle. You’ll want to pay less.

Service contract

– generally, a poor value. The dealer will try to sell you a service contract, or

extended warranty

, to cover

repairs

or service beyond the vehicle’s factory

warranty

.

Subprime loan

– loans to high-risk individuals with low credit scores that often have high interest rates and larger down payments.

Title

– the title, or pick slip, is issued by the

DMV

as your vehicle’s proof of ownership. Your lender, or lessor, holds the title until you’ve paid off the car or bought out the lease.

Trim level

– indicates what extra standard equipment comes with the vehicle. This might be a better deal than adding individual options.

Upside down

– slang for when you owe more on a loan than the vehicle is worth. Also known as being underwater.

Now that you’ve got the lingo, head over to Autoblog‘s Car Finder to help you choose your next car.