Finance Terms Explained | Kennesaw GA | Marietta, Acworth & the greater Atlanta area

Finance Terms Explained in Kennesaw, GA

At Hyundai of Kennesaw, we understand that financing a vehicle is an intimidating process, especially if it's your first time. It's enough stress to pull together documents like old pay stubs, tax forms and your credit history without having to google every other word on your contract. That's why we assembled a list of terms with their explanations so you'll feel more confident discussing the terms of your lease or interest rate. After reading through, you'll be able to car-talk like the savvy auto-expert that you are.



When we say financing, that simply means borrowing money from either one of our lenders or a bank of your choice, so that you can purchase the vehicle. The lender will purchase the vehicle for you, which allows you to repay the loan over an agreed term and interest rate. In financing, the lender gives you the service of borrowing its money, while you compensate by paying interest.


Leasing is a great way to try new cars that are still under warranty. It's like extended renting, since you'll return the vehicle at the end of the lease. Customers will pay a down payment ⁠— typically 20% of the vehicle's value ⁠— followed by monthly payments until the end of the lease term. The usual term is 24-36 months, but can be up to 60 months or 5 years. Once the term expires, you'll return the car or have the option to buy it outright.


You know this one ⁠— loan term simply refers to the length of time for the loan. For example, when you sign for a 36-month car loan, your loan term is 36 months. Shorter loan terms mean lower interest rates but higher monthly payments. Make sure the loan term matches your monthly budget.



Referring to the initial size of the loan, the principal is that big number you want to tailor down. If you finance a car that costs $18,000 and you place $2,000 as the down payment, you'll have $16,000 as the principal you'll repay.


Listen, the more the better. Money down is the amount of money you place up on a loan upfront. If you buy a car listed at $20,000 and you pay $5,000 upfront, you'll only have $15,000 left to repay. Also called a down payment, that $5,000 won't be charged interest, and it means lower monthly payments. Dealerships usually require a large down payment to secure a desirable interest rate.


If you borrow money, the interest rate is the fee included every month in the car payment. Interest rates protect lenders from risky customers who might not repay the loan. Many banks and dealers will call the interest rate APR, or annual percentage rate. APR is determined by your credit score, the term length, the age of the vehicle being financed and other relevant factors.



Cash back is a sweet deal. It's an incentive dealers and manufacturers will offer to encourage their customers to purchase a vehicle. It can shave off thousands of dollars on the selling price on your favorite car, or the dealer can write a check for the amount advertised. For example, a dealer may ask for $24,000 for a certain car but offers $2,500 cash back. You can use the $2,500 as the down payment and reduce the actual price to $21,500, or walk away with a $2,500 check in hand but a full-priced car.


You've heard this one before. Similar to cash back, a rebate is an incentive that will be applied to the selling price of the vehicle of your choice but only after purchase. Once all the paperwork is completed and you have that pretty keychain picked out, the dealer will write a check for the rebate amount or give you cash on hand. Cash back is instant, but you may have to wait on a rebate to arrive.


When you trade-in, you're offering your old vehicle to the dealership in exchange for credit toward the dreamy vehicle you want to purchase. It can take thousands of dollars off the asking price, but you'll probably end up financing the new car anyway.



When a car loses value, it's called depreciation. It happens year after year until on paper, the value is zero. It's important to remember that depreciation affects a car regardless of its condition. A new car loses around 10-20% just by driving off the lot in new hands. In five years, that brand-new Lincoln priced at almost $78,000 will shed 60% of its original value. That's $46,800 that you'll lose over time, regardless of how pristine you've kept the vehicle.


Equity is the difference between what the car is worth and the amount that you still have left to repay on the loan. If the value of your car is $15,000 but you still owe $6,000 to the lender, you have $9,000 in equity. It's important to keep this ratio balanced.


Otherwise, your car will have negative equity, or be upside down. Owing more than what the vehicle is worth is common, but it makes it difficult to sell. If you finance with us at Hyundai of Kennesaw, we'll try to keep you from making financial decisions that will lead to this imbalanced value.

If you're ready to start the financial process of owning or leasing your favorite model, contact us today or stop by Hyundai of Kennesaw at 2878 Barrett Lakes Blvd, Kennesaw, GA 30144. We look forward to serving our customers near Marietta, Acworth and the greater Atlanta area.

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