12 Car-Buying Terms You Should Know

Posted on October 11, 2023

IMAGE: Couple sitting inside car at dealership and salesperson showing the featuresWhen shopping for a car, it’s best to become familiar with the terms used by dealerships or private sellers to make an informed decision. Read on to learn the most common car-buying terms so that you’re ready to negotiate.

1. Window Sticker

The window sticker is required to be placed on each vehicle on a dealership’s lot. This sticker contains information about the car's price, standard equipment, miles per gallon and the expected cost of gas over a year.

2. MSRP (Manufacturer’s Suggested Retail Price)

The price that the manufacturer recommends for the vehicle is the MSRP. Federal law requires that dealers display the MSRP in the vehicle’s window. The actual selling price might be higher or lower than the MSRP.

3. Invoice Price

The invoice price is how much the dealer paid to buy the car from the manufacturer. The dealer can earn a profit in the difference between the invoice price and the selling price. By law, dealers are not obligated to share the invoice price, but it is always a good idea to ask.

Let’s look at an example: if a car’s invoice price is $40,000, and the dealer sells the vehicle at the MSRP of $45,000, they make $5,000 profit. This margin also allows the dealer some flexibility to sell a vehicle below MSRP and still make a profit. This also allows you, the buyer, negotiating power.

4. Destination Fee

This fee is what the manufacturer charges the dealership to transport the car from the factory to the dealer’s lot. This fee is listed on the window sticker and dealers typically pass this fee directly on to the consumer.

5. APR (Annual Percentage Rate)

The APR is the interest rate applied to your auto loan. It’s recommended that you shop around to find the lowest rate for your loan rather than settle for the dealership’s financing. Texell consistently offers low rates on all auto loans including new, used, or refinanced. View our current rates at Texell.org.

6. Down Payment

A down payment is the cash a buyer pays the seller or dealer toward the total price of the auto. The larger your down payment, the less money you need to borrow to purchase the vehicle. Keep in mind, you can apply the trade-in value of your current car and rebates toward your down payment. Let’s look at an example:

Total purchase price $45,000
Trade-in -$15,000
Rebate -$2,000
Loan amount $28,000

7. Trade-in

Many people trade in their current vehicle for a newer one, and you can use the value of the trade-in vehicle as a down payment. Dealerships offer different trade-in values, so check with several before trading in your vehicle.

8. Rebate

For new cars and trucks, manufacturers may offer a rebate, or a discount, as an extra incentive to qualified borrowers. Manufacturers use these discounts to encourage sales of a certain make or model. These rebates often range from $500 to $3,000.

9. Extended Warranty

An extended warranty covers repairs and maintenance after the manufacturer’s warranty ends. The dealership offers these warranties, but they can be more cost-prohibited for the buyer. It’s recommended to shop around for an extended warranty. Texell offers a variety of payment protection options, including extended warranties.

10. Dealer Installed Options

Many times, dealers add-on options to increase the value, including wheels, undercoating, or window tinting. The addendum sticker provides information on the options that the dealer included, so check it carefully. These options increase the price and are often more expensive than you would pay for the same item elsewhere. The price of these features may be negotiable but be prepared to walk away if the dealer insists on charging you for options you do not want.

11. Trim Level or Package

The trim level gives the buyer an idea of what equipment comes standard with the vehicle. Trim levels often use a combination of letters, like SE or LX. The more expensive trim levels have extra equipment that might make it a better deal to purchase rather than adding on those features to a lower trim level.

12. Title

A title is the legal document that formally lists the owner of the vehicle. You will receive a title if you are buying a new or used vehicle from a dealership or an individual. You take ownership of the title after paying off the loan or buying out the lease. If you have a loan on the auto, the financing bank or credit union will be listed on the title to ensure the loan is paid before the car is sold.

If you’re looking to buy a new vehicle, use these terms when it’s time to negotiate. Once you have your budget set, get pre-approved online through Texell. You can then head to the dealership with an Express Check. Visit Texell.org to learn more, or chat with one of our lending experts at 254.773.1604.

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