Loan Lingo: Understanding Basic Auto Loan Terminology


In addition to stocking a full range of used cars, High Q Auto offers flexible used car financing to Central Florida customers. We understand that not everyone has our extensive experience, so it's common for questions to come up during the finance process. Buckle up; we're about to define some common auto loan terms, and help you find a better understanding of how the process works while we're at it.

Common Auto Loan Terms and Their Meanings

  • Captive Lender: This is the in-house lender used by nearly every new car dealership. We do things a bit differently, working with a network of lenders so we can customize your loan to your unique financial circumstances.

  • Credit Score: Each of the three major credit bureaus issue a credit score based on the credit that's been issued to you, your credit utilization, and your history of on-time payments. Your loan's terms and conditions will be determined in large part by this score.Do you have a low credit score, or no credit history? Breathe easy. We're here to help regardless.

  • APR: The APR, or Annual Percentage Rate, annualizes the interest and other expenses paid on a loan.

  • Debt to Income Ratio: The DTI evaluates how much debt you've got relative to how much money you make. Lower debt and credit utilization means less money paid servicing debt, which makes lenders view you as a lower risk.

  • Finance/Financing: The act of borrowing money to buy a car.

  • Gap Insurance: There's a "gap" between what a car is worth after depreciation and what you still owe on it. Taking out gap insurance can cover the difference in those two numbers in the event your vehicle is totaled before it's paid off.

  • Principal: What you owe on your loan can be broken down into principal and interest. The principal is the cost of the vehicle itself, not counting the interest. So if your used Toyota Corolla costs $12,000 and you've applied a $3,000 down payment, the principle would be $9,000.

  • Secured Loan: A secured loan gets its name from the fact that you're putting something — usually property like your car or home — up as collateral. The alternative is an unsecured loan, which assumes an ability to pay based on your finances and credit history.

  • Term: The term is the duration of your loan. A longer loan term can be one way to get lower monthly payments, but be aware that interest is being charged monthly; a 72-month loan will cost more for that reason than one that lasts 36 or even 60 months. Crunch the numbers and see what works best for you — and if a longer loan term is a necessity, pay more than the minimum where you can (it'll save you money).

Qualifying for an Auto Loan

We understand that the terminology surrounding auto financing can be confusing, and the application process intimidating. That's why the finance department at High Q Auto puts considerable effort into keeping things as transparent and easy to understand as possible. If you've been left out in the cold by other dealerships, or if the service you've received elsewhere has left a bad taste in your mouth, visit us at 747 N. State Road 7 in Plantation, FL and rediscover what used car buying can and should be at its best.