{"id":78,"date":"2024-02-14T17:14:46","date_gmt":"2024-02-14T17:14:46","guid":{"rendered":"https:\/\/tt-blogs.dealerfire.com\/chargeacar\/?p=78"},"modified":"2024-02-14T17:14:47","modified_gmt":"2024-02-14T17:14:47","slug":"presenting-the-car-buying-dictionary","status":"publish","type":"post","link":"https:\/\/www.charge-a-car.com\/blog\/presenting-the-car-buying-dictionary\/","title":{"rendered":"Presenting the Car Buying Dictionary"},"content":{"rendered":"\n

The used car buying experience<\/a> can sometimes feel like it\u2019s operating with its own language. Gap insurance, loan-to-value, negative equity… understanding all the terminology thrown at you can be intimidating.\u00a0\u00a0<\/p>\n\n\n\n

Here at Charge-A-Car<\/a>, our goal is to make the car buying process as simple as possible. For that reason, we\u2019ve assembled this convenient dictionary to break down some of the auto jargon you\u2019ll encounter on your car buying adventure.<\/p>\n\n\n\n

Down Payment:<\/strong> <\/h4>\n\n\n\n

A down payment is a lump sum of money you give to the dealer upfront before purchasing the car. At virtually all buy here pay here (BHPH) dealerships, a down payment is required to get approved for a loan. If you\u2019re able to put down an amount larger than the minimum required, it means lower monthly payments moving forward.<\/p>\n\n\n\n

A down payment at a BHPH is typically around 20% of the car\u2019s selling price. Since BHPH dealers rarely run credit checks, this amount may be higher than at other dealerships, to help mitigate the sellers\u2019 risk. Fortunately, a higher down payment means lower interest rates for the duration of your loan.<\/p>\n\n\n\n

Gap Insurance:<\/strong> <\/h4>\n\n\n\n

Gap insurance<\/a> \u2013 also known as loan gap coverage \u2013 is an optional car insurance coverage. In the event that your car is damaged or stolen and you owe more than the car\u2019s depreciated value, gap insurance is there to help cover the difference. It’s called gap insurance because it helps pay the gap between the depreciated value of your car and what you still owe on it.\u00a0<\/p>\n\n\n\n

Because the average used vehicle depreciates quickly \u2013 20% after driving it off the lot and 10% in the first month of ownership is the general barometer \u2013 it’s not unusual to owe more on a loan than your vehicle is worth, making gap insurance a crucial investment. <\/p>\n\n\n\n

Interest Rates:<\/strong> <\/h4>\n\n\n\n

Interest rates<\/a> \u2013 or simply loan rates \u2013 are what you\u2019re charged every month as part of your loan agreement. A percentage of the total loan, interest rates represent what you pay monthly in addition to the base amount. Many buyers choose to finance with longer-term loans in order to reduce interest rates, with average loans landing between 70-80 months.\u00a0<\/p>\n\n\n\n

Loan-to-Value Ratio:<\/strong> <\/h4>\n\n\n\n

A loan-to-value ratio (or LTV) is the total dollar value of your loan divided by the actual cash value of your vehicle. For example: if you take out a $25,000 loan to buy a $30,000 car, your LTV would be 83%.  <\/p>\n\n\n\n

LTV changes over time as you pay off your loan. That can be largely attributed to the vehicle depreciating as it ages and racks up miles. LTV also naturally declines as you continue to pay off the loan, lowering the loan portion of the ratio. <\/p>\n\n\n\n

Monthly Payments:<\/strong> <\/h4>\n\n\n\n

Perhaps the most straight-forward term here, monthly payments are simply the amount you\u2019re paying towards your loan every month. What\u2019s important here are the guidelines you should follow to make sure you\u2019re not biting off more than you can chew. The average monthly payment for used cars is approximately $533. In general, no more than 10-15% of your monthly take-home income should be spent on your monthly payments. <\/p>\n\n\n\n

Negative Equity:<\/strong> <\/h4>\n\n\n\n

Negative equity is when you owe more on your car than it\u2019s worth. For example, if your loan amount was $30,000 and you still owe $15,000 \u2013 but your car is only valued at $10,000 – $5,000 is your negative equity amount. Many factors can cause negative equity, including low down payments or putting excessive mileage on your vehicle. <\/p>\n\n\n\n

For more info on how to bridge this divide, see \u201cGap Insurance.\u201d <\/p>\n\n\n\n

Experience Great Deals, Redefined<\/strong> <\/h4>\n\n\n\n

Transparency is of the utmost importance to us at Charge-A-Car. We\u2019ll work with you through every step of the financing process, breaking down each component and defining each term. After all, used car buying should be a pain-free experience. Schedule your test drive<\/a> at Charge-A-Car today, and drive into tomorrow with a clear path forward.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Here at Charge-A-Car, our goal is to make the car buying process as simple as possible. For that reason, we\u2019ve assembled this convenient dictionary to break down some of the auto jargon you\u2019ll encounter on your car buying adventure.<\/p>\n","protected":false},"author":387,"featured_media":79,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[26],"tags":[24,75,7,54,60,17,52,65,81,10,82,83,84,39,25,33,85,80,86,8,71,58,9,61,14,45,38],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\n\n\t\n