Car financing terminology

Amount financed: the amount of credit provided to you.

APR: Annual Percentage Rate, or APR, is the cost of credit expressed as a percentage.

Down payment: the amount of cash or trade equity you apply to your purchase.

Equity: the difference between your trade payoff balance and its value. It may be positive or negative.

Finance charge: the total dollar amount you pay to use credit.

Retail installment contract: the finance agreement allowing for payment over time at a fixed monthly payment amount and rate.

Simple Interest: finance charge calculation based on the unpaid principal balance, number of days between payments and the APR.

Stipulation: additional documentation/action required to complete the transaction, like proof of income.

Term: the number of monthly payments provided for in the retail installment contract.

Total of payments: the amount you will have paid after you have made all payments as scheduled in the retail installment contract.

Total sales price: the total cost of your purchase on credit including finance charge, down payment and amount financed.

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