Glossary of Vehicle Finance Terms – Valley Auto Loans

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Auto Loan Terms and Definitions

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This is the annual percentage rate your lender will use to figure your interest you will pay on the loan

Bill of Sale

A bill of sale is an official document, made by the dealer or seller, to record the sale of a vehicle.

Black Book

Black Book is a list of information that determines the price or value of a vehicle. This method bases the value of a vehicle on information gathered from wholesale vehicle auctions.

Blue Book

Typically known as Blue Book Value, this is simple the value of a vehicle as determined by Kelley Blue Book, Inc.


A co-signer is any person or party who uses their own credibility to help you be approved for a loan. If you do not pay on time, or if other issues arise, the matter becomes your cosigner’s responsibility as well as your own.


A term often used to mean credit history. Your credit history shows banks or potential lenders whether you are responsible enough to handle a loan.

Credit Bureau

Companies that keep track of your credit history and score.

Credit History

Your credit history is a record, which displays your ability to handle loans or other debts responsibly.


A creditor is basically someone who loans funds to pay for another loan.

Damaged Credit

This is often called bad credit or poor credit. This is any credit score below the average score. This is the result of late payments, repossession, foreclosures or bankruptcy. Although it is not good to have a low credit score, you can still be approved for an auto loan with bad credit.


An auto dealership is a business that is authorized, by a car manufacturer, to sell their vehicles.

DTI, or Debt-to-Income Ratio

This is a ratio designed to compare someone’s debt, to the amount of income that they earn.


To default is to break a credit agreement, usually referring to not paying bills.


Delinquency is to miss or pay car payments late.


This is a term used to describe the loss of value in a vehicle as it ages and takes on typical wear and tear.


A disclosure is any information that is given to customers describing damage or incidents involving a vehicle that they wish to purchase.

Down Payment

A down payment is an amount of money required to lower the price of a vehicle before beginning monthly payments.


This is the funds paid on a loan. If your vehicle is more valuable than the remaining debt of your loan, you have positive equity; otherwise it is negative equity.

FICO Automotive Credit Score

Credit reporting agencies are now using a report called your FICO auto credit score. It lists all of your past auto loan credit history that is required for a lender to make an accurate appraisal of your ability to be responsible with auto loans.

Finance Charge

A finance charge is the calculated total amount of interest that you will pay for an auto loan.

Grace Period

A grace period is a stretch of time from a payment due date. During this time, you can be late on your payment with no penalty.

Gross Monthly Income

This is the total income gained monthly, without any deductions such as child support, tax payments, etc.


This is a charge added by lenders which causes the amount owed on a loan over time.

Interest Rate

An interest rate is the percentage of increased charge on a loan, both the lender and borrower agree it upon before the loan agreement is completed.

Late Payment

A late payment is simply a payment made after the time dictated by the lender.


A lien is when a finance company takes possession of a vehicle until the debt is paid.

List Price

The list price is the price suggested by the manufacturer. It is also known as “MSRP” or “Sticker Price.”


This is the amount a price is raised by the dealer from a manufacturer suggested price.

Monroney Sticker

This is a price sticker required to be placed on all vehicles when sold by a dealer. It shows the vehicles various options and specifications, as well as the manufacturer’s suggested retail price (MSRP).

Net Income

This is a borrower’s total yearly income, after subtracting federal and state taxes.

Payment-to-Income Ratio (PTI)

This is a calculation showing the percentage of a borrower’s income that they will need to fund a loan.

Proof of Income

A proof of income can be a bank statement or pay stub that proves the presence and value of a borrower’s income.

Proof of Residence

A proof of residence is any official document that shows the borrower’s current home or living space. A driver’s license is one of the more commonly used proofs of residence.


This is when a borrower re-negotiates their loan with a new lender. This can help to lower payments and sometimes even lower the total cost of a loan.


Repossession usually occurs when a borrower defaults on their loan and seems to have no intention of paying their debts. The lender will seize the vehicle.


Stipulations are any documents that a lender may require to approve a loan. These may be proofs of income, proofs of residence, etc.


Vehicle taxes are funds paid to the state or federation, to satisfy the yearly financial requirements to own that vehicle.


A loan term is the entire duration of the time needed to repay the lender for that loan.


A title is a legal document that acts as proof that a citizen owns a specific vehicle.

Title or Auto Equity Loan

This is a loan that requires the title of your vehicle to be turned over to cover the loan. The loan you get consists of cash, and your car title is returned to you when the loan is repaid.

Title Certificate

This is an official document that can only be provided by your local DMV which states that you own the title to a particular vehicle. It is also called a pink slip.

Trade-in Value

This is the amount of money that a vehicle is worth when traded in at a specific dealership.


This term used to signify when a vehicle is worth less than the remaining debt on the vehicle loan.

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