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​ Commonly Used Finance Terms

Finance Terms

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Buying a new car can be stressful, especially when it comes to understanding the financing you are agreeing to. There are a number of common finance terms that might trip you up when you are negotiating your car loan and down payment. These terms include phrases like APR, MSRP, and direct lending. To help your car-buying experience go easier, make sure you understand what these three terms mean.



Annual percentage rate—also known as APR—is the annual rate you will be charged for borrowing. This number is expressed as a percentage, representing the actual yearly costs of funds over the course of the loan. Typically, APR includes any fees or additional costs associated with the loan. This number can vary and takes into account the interest rate, transaction fees, late penalties, and a variety of other factors.



This acronym stands for “manufacturer’s suggested retail price” and is exactly as it sounds. The MSRP is a guide figure for the vehicle’s price from the manufacturer. Dealers can sell their vehicles at a price that is higher or lower than the price of the car, but it is a great start for negotiations.

Direct Lending

If you are choosing to get a loan from a lender other than a bank, this is direct lending. Dealerships tend to allow buyers to take a loan directly through the dealer, rather than through a bank, making the loan process significantly easier. ​ 
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