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Financing Terms You Should Know

Common Financing Terms You Should Know 

There's little doubt that cars are generally getting more expensive with all the new technologies, designs, and standard features. The rising price point of vehicles has resulted in more drivers choosing to finance their next vehicular purchase. Financing comes with a number of benefits for those able to read and comprehend the terms they're agreeing to. Here are a few financing terms you should know before signing for a loan.

Credit Score

One of the main factors lenders use to determine whether or not to approve an application is a driver's credit score. This is determined by a variety of factors, including amounts owed and payment history. It also influences what interest rate drivers are charged.

Depreciation

This is the decline in a vehicle's value over time. Some vehicles lose their value faster than others. One example is the steep decline, sometimes up to 40 percent, in value as soon as a new vehicle is driven off the lot. Sometimes depreciation can result in drivers owing more than the vehicle is worth.

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Down Payment

The amount of money a buyer can put up front when buying a car is called the down payment. The higher the down payment, the lower the monthly payment will be. Drivers can significantly reduce the amount of interest they pay over time with a sizeable down payment.

Gap Insurance

This is an insurance policy that protects drivers from paying more than they owe on a vehicle in the event it's stolen or totaled. Standard automotive insurance only covers the value of the car, not the entirety of the loan. Many contracts offer gap insurance to protect the lender's investment as well as the borrower's finances.

Interest Rate

Also known as the Annual Percentage Rate (APR), this is what lenders add on to the loan as a sort of charge for use of their money. Various factors influence the interest rate, including credit score.

Contact the finance department at Plaza Lincoln for more information regarding your financing offers.


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