Knowing Key Terms Can Help Unlock Successful Vehicle Purchases

 

You shouldn't have to be an acronym expert to purchase a new or used vehicle. But the alphabet soup that comes with buying an automobile today - MSRP, APR, GAP, NADA, ASE - can leave some people sending out an SOS.

 

Following are some of the key terminologies that credit union members should be familiar with to make informed decisions regarding their next car purchase.

 

When Shopping:

  • Certified Used Vehicle: Many manufacturers and dealers evaluate the condition of a used vehicle - and "certify" it - via an inspection. Most of the inspections performed by manufacturers, dealers, and other car sellers are rigorous and comprehensive - 100 points or more, including all major systems and components such as brakes, steering, suspension, transmission, electrical, air conditioning, and heating. Certified used vehicles also often come with extended warranties and special financing, among other perks.
  • Manufacturer's Suggested Retail Price (MSRP).
  • Vehicle Identification Number (VIN): All cars and light trucks built since 1982 have a unique 17-character VIN that provides access to valuable information about that vehicle's history. The VIN is found on dashboards, driver's side door jamb stickers, and title documents
  • No-Haggle Pricing: An idea that Enterprise Rent-A-Car founder Jack Taylor helped pioneer in 1962. Additional companies have adopted this practice since, where the price marked on an automobile is the price for which it will sell.
  • Limited Power Train Warranty: This generally covers engine, transmission, transaxle, and drive system - parts related to getting power from the engine to the drive wheels for a time specified in miles/months.
  • CARFAX: This company provides complete vehicle history reports that can uncover costly hidden damages, such as flood damage, odometer fraud, even a vehicle that has been totaled or rebuilt. Used-car shoppers can get reassurance that they're not buying a damaged vehicle or lemon in seconds by simply entering the vehicle's VIN at www.carfax.com or requesting a copy from the dealer or from a Commonwealth Credit Union financial service representative at 800.228.6420 or 502.564.4775.
  • NADA: NADA Official Used Car Guide® 1. NADA stands for National Automobile Dealers Association. Along with Kelley Blue Book, one of the leading guides for determining the value of a vehicle.
  • Kelley Blue Book 1. Along with NADA, one of the leading guides for determining the value of a vehicle.
  • 1 NADA and Kelley Blue Book suggested retail values should be considered estimates only and vary by region, mileage, condition, and vehicle options. Kelley Blue Book is a federally registered trademark of the Kelley Blue Book Company, Inc. NADA and Kelley Blue Book are not affiliated in any way with Commonwealth Credit Union.

When Purchasing:

  • Zero Percent Financing: A sales tactic employed by the financial arm of the vehicle manufacturing industry in which the sales prices are generally raised as a way of off-setting the "zero percent" interest rate offered on financing through the dealer.
    (See "The Truth About Zero Percent Financing.")
  • APR (Annual Percentage Rate): This is the yearly rate charged to a consumer to borrow the finance company's money. This is usually a percentage. Credit unions are among the most competitive vehicle lenders, often offering the best rates and superior service. They focus on member service, not the bottom line
  • Equity (vehicle): The value of the vehicle, minus the outstanding loan amount or payoff.
  • Gap Waiver/Insurance: Waiver/Insurance that covers the "gap" between the actual value of an automobile at the time of a total loss, and the amount a person still owes the finance company. Due to depreciation of new cars and deals like "zero percent financing" and "no payments until next year," vehicle owners can be left with thousands of dollars to pay from their own pocket if they do not have gap waiver/insurance on their loan.
  • Term: The amount of time an individual has to pay back the money that was borrowed. This is generally 12 to 72 months.