Here are some of the frequently used auto financing terminologies that you should know before going to a dealership:
Fair Debt Collection Practices Act – it is illegal for third parties to collect debts for another person or company, thanks to the federal debt collection practices.
Guaranteed Asset Protection – It is also abbreviated as GAP. When a person has negative equity or is underwater on their auto loan, there are products on the market designed to safeguard them in case an accident occurs.
Lease – paying in installments rather than in full for a vehicle, whether new or secondhand, is referred to as lease. During the same period, client has the option of either purchasing the vehicle outright or refinancing the residual value.
Liquidity Risk – A danger of losing money if you can’t sell your assets for what you owe on them.
Loan-to-Value Ration – often abbreviated as LTV, lenders look at this percentage while determining whether or not to approve a loan. Auto loans with high loan-to-value rations are typically considered riskier and consequently carry higher interest rates.