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Finance Terms Explained in Asheville, NC

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Here at Asheville Ford, we understand that financing a car can be overwhelming. From having to pull together documents to reading the fine print, there's a lot to understand and read through before signing your name by the X on that contract. That's why we want to help by explaining some of the most common finance terms; we want you to feel more confident when signing a contract.

Most Common Finance Terms

Finance
In layman's terms, financing simply means borrowing money from one of our lenders or a bank of your choice so you can purchase your desired vehicle. Essentially, the lender purchases the vehicle for you, allowing you to repay the loan over an agreed term and interest rate. When financing, the lender gives you the service of borrowing its money, while you pay them back with interest.

Leasing
Leasing, essentially, is like extended renting. It's a great way to try out new cars that are still under warranty, but you'll return the vehicle at the end of the agreed term. Customers pay a down payment, generally 20% of the vehicle's value, followed by monthly payments until the end of the lease term. The typical term runs anywhere from 24 to 36 months, but it can go up to 60 months or 5 years. Once your term is up, you can return the car or have the option to purchase it.

Term
This is an easy one. The term is simply the set amount of time for a loan or lease. For example, the term on a 36-month loan is 36 months, or three years. Shorter terms usually mean higher payments but lower interest rates. When agreeing to a loan, make sure the loan term matches your budget.

Principal
The principal refers to the initial size of the loan, which is that big number you want to chip away at. For example, if you finance a car that costs $18,000 but put down $2,000 for your down payment, your principal you'll have to repay would be $16,000.

Money Down
The more, the better! Money down is how much money you place up front on a loan. It's also called a down payment. The more you put down up front, the lower your monthly payments will be. If you purchase a vehicle listed at $20,000 but you pay $5,000 down, you'll only have $15,000 left to repay. Your money down won't be charged interest, and dealerships usually require a large down payment to secure a desirable interest rate.

Interest Rate
When you take out a loan, you're usually charged interest. This is the fee added onto your monthly payments, and it protects lenders from risky customers who may not repay the loan. You may also hear the interest rate referred to as the 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
Cash back is a pretty sweet deal. It's an incentive from manufacturers to encourage you to purchase a vehicle. It can shave off thousands of dollars on your vehicle purchase price, or the dealer can write a check for the amount advertised. You can usually use the cash back as the down payment and reduce the selling price, or you can walk away with a check in hand.

Rebate
This is probably a term you've heard before. A rebate is an incentive that is usually applied to the selling price of a vehicle, but only after purchase. Once all the paperwork has been completed, 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.

Trade-In
When trading in, you're offering your old vehicle to the dealership for credit towards the new vehicle that you want to purchase. By doing so, you can take thousands of dollars off the asking price, although you'll probably end up financing the new car anyway.

Depreciation
Depreciation is when a car loses value. It happens year after year until the value is zero. You should happen to remember that depreciation affects every car, regardless of its condition. A brand new car loses around 10-20% of its value just by driving off the lot. In five years, that brand new vehicle will shed 60% of its original value, no matter how pristine you've kept it.

Equity
Equity is the difference between what the car is worth and how much you still owe on it. 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 and not gain negative equity; this means you owe more on the loan than what the car is worth.

Upside Down
This is what we refer to as negative equity, as previously mentioned. Owing more on the vehicle than what it's worth makes it difficult to sell, and negative equity can follow you into a new loan. If you finance with us here at Asheville Ford, we'll try to help keep you from making this error.

If you have further questions or would like to know more, give us a call or visit us at 611 Brevard Rd, Asheville, NC 28806. We look forward to serving our customers from Weaverville, Hendersonville and Fletcher.

Although every reasonable effort has been made to ensure the accuracy of the information contained on this site, absolute accuracy cannot be guaranteed. This site, and all information and materials appearing on it, are presented to the user "as is" without warranty of any kind, either express or implied. All vehicles are subject to prior sale. Price does not include applicable tax, title, and license charges. ‡Vehicles shown at different locations are not currently in our inventory (Not in Stock) but can be made available to you at our location within a reasonable date from the time of your request, not to exceed one week.

*The advertised price does not include sales tax, vehicle registration fees, finance charges, and any other fees required by law. The advertised price does not include a closing fee of $898.50. All prices include all applicable rebates, Farm Bureau rebate, factory discount, dealer discount, Ford Credit Financing Cash, and Trade Assist Rebate. Pricing for all new and used include $1000 Trade Cash; must trade a 2014 or newer vehicle to qualify. Truck pricing does not include dealer installed bedliner. Prices subject to change without notice based on Ford Motor Company Incentives. However, there can be lag time between the sale of a vehicle and the update of the inventory. While we make every effort to ensure the data listed here is correct, there may be instances where some of the factory rebates, incentives, options or vehicle features may be listed incorrectly as we get data from multiple data sources. PLEASE MAKE SURE to confirm the details of this vehicle (such as what factory rebates you may or may not qualify for) with the dealer to ensure its accuracy. Dealer cannot be held liable for data that is listed incorrectly. See dealer for full details. Some exclusions may apply.