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Capitalized Cost

The capitalized cost of a vehicle is the negotiable price of a vehicle with regards to it being leased. A lower “cap” cost generally translates to a lower monthly payment in the world of auto financing and car loan.

Capitalized Cost Reduction (Cap Cost Reduction)

This refers to any reduction that brings down the “cap” cost of a vehicle, such as cash down payments, trade-in credits, or rebates. These items will reduce the amount being financed on your car.

Captive Finance Institution

A captive finance institution, as opposed to an independent one, is a lease company or financier that is associated with an auto manufacturer. The captive finance institution is created to finance products made by that manufacturer for consumers. Toyota, for instance, has its own financing division. One of the best-known examples of this is General Motors’ Acceptance Corp (GMAC) and Ford Motor Credit (FMC).

Cash for Clunkers

This was the nickname for the now infamous CARS program instituted by the Obama administration. Last autumn, American car owners were offered a cash rebate toward the purchase of a new car when they traded in their older “clunkers,” provided that there was a significant improvement in fuel efficiency between the new car and the old one. The aims of the program were twofold: to get a good chunk of the pollution-spewing clunkers off the road so as to contribute to better air quality, and also to stimulate the flagging domestic auto industry. There is evidence that Cash for Clunkers had at least modest success in both these arenas, but it was also beset with numerous issues. The U.S. government was accused of being slow to remit dealership reimbursements after the cumbersome paperwork was filled out, leading to many dealerships taking the illegal step of denying customers delivery of their cars for days or weeks.

Cash Rebates

Cash rebates are a highly-coveted incentive for new car buyers. This is a cash-back deal provided directly from the manufacturer to the customer. It is intended to offset the purchase price of the vehicle when computed as a net figure. In reality, though, almost all buyers elect to apply their cash rebate(s) to the down payment on their new car or truck. During this past year, the U.S. government also provided a cash rebate for car buyers trading in their older-model vehicles for newer and more fuel-efficient styles during the “Cash for Clunkers” program

Cash/Finance Rate Combo

In dealership parlance, this is a term referring to the combination of a buyer’s cash down payment and the finance rate given by the auto manufacturer.

Caveat Emptor

This is a widely-used Latin phrase that translates to “let the buyer beware.” Especially in the case of as-is car purchases, this means that a buyer closes the deal at their own risk. It is meant to convey a limited liability on the part of the seller with regard to whatever merchandise is being traded.

Certificate Of Title

A certificate of title is a legal document that is conferred on a car owner by a title company or attorney-at-law affirming that the title (ownership papers) of a car are held by the owner. For those who finance their vehicles, the completed title won’t belong to them until they have fully paid off their car loan.

Closed-end Credit

Unlike an open or revolving line of credit, a closed-end credit transaction in which a borrower agrees to pay the lender the amount of the loan plus any applicable finance charges over a certain period of time – as opposed to a line of credit that may be extended or have the amount increased and decreased over an indefinite term. Obviously, an auto loan is the quintessential example of closed-end credit.

Closed-end Lease

A closed-end lease is the most common permutation of auto lease that is extended today. With a closed-end lease, the lessee may return the car to the dealer at the end of the term after paying any end-of-term fees (like the disposition fee) and the lease will be considered to be officially over. The major difference between closed-end and open-end leases is that the former tends to carry slightly higher monthly payments in most cases.

Co-maker

This term is synonymous with “co-signer;” a second party who signs for responsibility on a car loan or lease. As is the case with any type of promissory note, all co-makers are equally responsible for the obligation. If one co-maker should default, any other co-maker listed will have to assume responsibility for the loan. In terms of car loans, co-makers are usually spouses, or the parents of a child who may not yet have the credit history sufficient to obtain their own auto loan.

Co-signer

As I just discussed, “co-signer” is synonymous with “co-maker.” This term refers to one or more parties who all sign a promissory note (like a car loan or lease agreement) in which they use one another as fall-backs in the event that one signer cannot honor the loan agreement. Regardless of who is supposed to be or has been paying the monthly car payment, every co-signer of a loan will be held responsible if the loan falls into default. Therefore, it is a sizeable responsibility to take on and should not be taken lightly. In terms of buying cars, co-signers are generally spouses. A co-signer may be requested or preferred if the principle loan holder has poor or little credit, however. Sometimes parents will co-sign car loans on behalf of their children.

Collision

Collision coverage is the section of your auto insurance policy that is affected if your car were to collide with another vehicle or stationary object (such as a utility pole, fire hydrant, or streetlight) during an accident. Having collision insurance is important so that your insurer will pay out of you are at fault in such an incident, and also so that your insurance company will seek out the insurer of another driver if they are found to be at fault in an accident in which you were involved. Of course, a deductible will apply when you file a claim under your collision coverage.

Commitment Fee

This is one of those miscellaneous fees that you might have noticed when you bought a car, but not fully understood. A commitment fee is a certain amount of money that is paid to a lender from a borrower in exchange for an agreement to lend money based on agreed-upon terms and an agreed-upon period of time. As a car buyer you pay a commitment fee to the bank or financier that is getting you your car loan.

Compatible

Believe it or not, this is not an astrologic term having to do with whether your should buy that Ford Mustang in green or in blue. (Well – not in financial terms, anyway!) “Compatibility” actually refers to the many, varied allowances, rebates, and incentives that are made available to car buyers when they go to purchase a new vehicle. Some of these deals are exclusive, meaning that you can only choose one that may not be combined with other deals. Many, however, are “compatible” or “stackable,” meaning that you can be eligible for and use multiple incentives during the same purchase as long as you are meeting the guidelines for each program. Utilizing compatible deals is the best way to save money on your car purchase, it just sometimes requires a bit of research to see what options you have available.

Conditional Commitment

A conditional commitment is made by a lender to a borrower as an agreement to lend money provided that the borrower meets certain requirements. These requirements generally involve the buyer’s credit and income qualifications, as well as the buyer choosing a certain model from a manufacturer’s line. The loan being extended is conditional on certain prerequisites, hence the name.

Consumer Credit

Consumer credit, as the name implies, is a type of credit that is extended to consumers for their own personal use. An auto loan is a very common form of consumer credit in wide use in the United States. These loans, unlike commercial or business loans, are generally unsecured and do not rely upon collateral to back them. Of course, consumer loans are also not extended generally for the large amounts of money that commercial loans are.

Consumer Credit Counseling Service

A consumer credit counseling service is one dedicated to helping consumers work out their financial issues in a way that works for them. These groups will offer services aimed at budgeting and creating debt repayment plans. They may also work with a consumer’s creditors to pay back debts that have spiraled out of control for consumers. Seeking out the services of a reputable consumer credit counseling service is generally an excellent first step for consumers who are feeling like their debts and financial matters are getting out of control and would like a professional opinion on their situation.

Consumer Credit Protection Act

Back in 1968, legislation was passed to spell out consumers’ rights and responsibilities with regards to lending. The Consumer Credit Protection Act was a landmark law, because these things had never been legally clarified before. After this law was passed, creditors were required by federal law to describe the comprehensive costs of borrowing in understandable terms. This included full disclosure of how much credit would cost. In the past 41 years there have been many laws that have added to or clarified the CCPA, but the original law remains important for what it gave to consumers.

Consumer Debts

Consumer debts are those incurred for personal needs and not the needs of a business or corporation. This term is synonymous with “consumer credit.” The opposite of consumer debts are commercial debts, which are generally for larger amounts of money and also tend to be secured by collateral.

Consumer Leasing Act

The Consumer Leasing Act was passed by the United States government in 1976 with the purpose of spelling out car dealerships’ responsibilities in disclosing the costs and conditions of leasing an automobile. As originally written, the law refers to auto leases that last more than four months, are for a car intended for family or home use, and involve an obligation of less than twenty-five thousand dollars.

Conveyance

A conveyance is another important legal document involved in the sale of a car. It is the form that officially transfers title to property from one entity to another, such as from a bank to a car owner. A conveyance tax is tied to this form, and is usually included in the selling price of a car.

Conveyance Tax

A conveyance tax is a tax on the transfer of real property, and is bundled along with the conveyance in an automobile sale.

Credit Rating

You know by now that your credit score is pretty important. That is extremely true when it comes to buying a car. Your credit score pretty much makes or breaks your ability to purchase the vehicle of your choice at a cost that is anywhere near affordable for you. Your credit rating is an objective score that represents your ability to repay debts as a function of your current and expected future incomes and your history of repaying your obligations. In-depth information aboit your past and current debts will be included in your credit report, the information of which is used in calculating your credit rating or score. The FICO score, administered by Fair Isaac, is the leading metric for establishing credit ratings in the United States.

Credit Report

Your credit report is essentially a snapshot of your financial information over a long period of time. This document contains the pertinent information about your previous and current debts and lines of credit and how you repay them. Loans, credit cards, utilities, mortgages, and all sorts of related items will all appear on a complete credit report, so that prospective lenders can see how you repay your obligations. The balances on these debts are listed, along with your income. In this way, lenders can also get a sense of your debt-to-income ratio, which is one of the most important considerations in determining whether you are reasonably able to handle more credit (like a car loan). Keeping your credit report clean of mistakes and making sure that nothing negative ends up on it are two major goals for responsible adult consumers. A solid credit history will get you approved for an auto loan more easily, as well as afford you a much better interest rate.

Credit Reporting Agency

A credit reporting agency or credit bureau is a for-profit agency that accumulates and sells information on consumer credit usage. In the U.S., the three major credit bureaus are Equifax, Experian, and TransUnion. Each of these three will have a credit report in your name. They might be slightly different, but the content on all three should be as close to the same as possible. These reports are made available to those who have a business-related need for your information, namely potential lenders. You are entitled to one free credit report a year from each of the Big Three credit reporting agencies, which you should take advantage of to check on a regular basis for the cleanliness and accuracy of your credit information.

Credit Score

A credit score is a three-digit number that is assigned based on the information in an individual consumer’s credit report. It is intended to reflective of a consumer’s ability to repay their debts, and is used by potential lenders to gauge a borrower’s worthiness to obtain credit. A higher credit score is more positive; lower credit scores will either be denied or have credit offered on a much higher rate of interest. The FICO credit score (which ranges from roughly 350 to 850) is the most commonly-used metric in this country. Simply put, a credit score is the distillation of the pages of information in a credit report. Many auto lenders will have established a minimum credit score criterion to even have a borrower be considered for a loan on a new car. Anyone who says “no credit, no problem” is lying to some extent – you will always end up paying a lot more in interest for the privilege of having your credit score overlooked.

Credit Scoring System

A credit scoring system is any metric that is built to measure the likelihood that a borrower will be able to repay future debts. Any credit scoring system uses a mechanism to give each consumer a score based on their creditworthiness.

Credit Union

As opposed to a bank, a credit union is a nonprofit financial institution. A credit union is collectively owned by all the members belonging it, and is controlled by those representing their interests. Generally a group of people with something in common (like an employer) have their own credit union, although some credit unions are simply tied to a specific geographical region. Credit unions tend to offer lower rates of interest on credit than banks do, although this is not always the absolute rule. For this reason, credit unions are always a worthwhile avenue of exploration when you are pricing credit for a new car.

Creditor

A creditor is another name for a lender, or one that is owed money by a borrower.