Buying a new car can be a confusing experience for people due to the unique terms that salesmen often use. The decision to invest in a new car can change a person’s life, so that’s why we have compiled a list of common finance terms people need to know. We hope these terms and their explanations will help people feel more comfortable when visiting Bill Walsh Honda:
Destination Charge: This refers to the cost associated with shipping a vehicle from the factory to a dealership.
Dealer Invoice: This is the amount of money that a car manufacturer charges a dealer to purchase one of its new vehicles.
Service Contract: This is a pre-paid plan that allows your vehicle to be serviced at the dealership at a discounted rate. People usually are offered a service contract when finalizing their new car purchase in the F&I office.
F&I: Simply put, this stands for finance and insurance. If you’re buying a new car, then you’ll go to the F&I office to iron out the details of your deal. When visiting the F&I office, you’ll be offered additional features like service contracts and extended warranties.
Out The Door: This refers to the total cost of a vehicle, when including its purchase price, sales tax, and the cost to register the vehicle with the government.
GAP Insurance: It is well known that once a new vehicle is driven off the lot that its value depreciates by at least 20% because it is now a used automobile. GAP insurance, which stands for Guaranteed Auto Protection, will cover the cost of what you owe on the vehicle and what the vehicle is actually worth.
Spiff: If you hear that a certain vehicle has spiffs on it, then that means the manufacturer is offering special incentives to the dealer for them to sell the vehicle. These incentives may include discounts or special lease deals.
Trade-in Value: This is the amount of money that a dealer is willing to pay for your old car.
Up Front Costs: This is the down payment for your vehicle and other fees that must be paid before being allowed to leave the dealership with your vehicle.
Mileage Limit/Allowance: When you lease a vehicle, there’s a predetermined amount of miles which you are allowed to drive it. If you go over the allotted hours, then you will be charged an additional fee.