Buying a Car? You Need to Know These Financing Terms

Unless you’re going to the dealership with a whole lot of cash in hand, you’re probably going to be financing your new vehicle.

It can be confusing but having a handle on these financing terms can bring some clarity to the process.

When you finance a vehicle, you’re borrowing money to pay for it. If you have the cash to purchase a car outright, you don’t have a need for financing.

Your Annual Percentage Rate is the cost you’ll pay, per year, to borrow money. This number includes fees and is expressed as a percentage. Getting a low APR means you’ll pay less over the life of the loan.

Since you have a bank account, you’re probably pretty familiar with this term. When it comes to financing a vehicle, it’s the amount of the loan still left to pay. It goes down each time you make your monthly payment.

Down Payment
This is the amount of money that you may be required to pay in order to finance a vehicle. The larger the down payment, the lower your monthly payments will be.

Interest Rate
Sometimes confused with APR, this is a percent of the amount you owe to the bank or lending institution as a fee for borrowing money.

When you pay a monthly fee for the use of a vehicle that you don’t own, you’re leasing it. At the end of your lease, you return the car and owe nothing more as long as you returned it in good condition and didn’t go over the mileage limits.

This is a legal document that indicates who owns the vehicle. If you’re financing a car, the bank or lending institution has possession of the title until your agreement is met and you have paid in full. At that point, the title is transferred to your name.

If you’re ready to buy a new or used Mazda and have financing questions, give us a call at Park Mazda, or stop in today!