Buying a new vehicle is one of the biggest purchases you probably make, and like most buyers, you need a loan to get the deal done. While your dealer's finance and insurance department can offer loan deals you may not find elsewhere, and it's convenient, be prepared and understand the finance terms you'll run into once you sit down with the finance manager. Or be an informed shopper if you're getting your loan from a direct lender source such as your usual bank or credit union.

Keeping all the numbers, discounts and incentives is hard enough. Know how it all fits together and enjoy driving home in your new vehicle.

The Federal Trade Commission (FTC)  has resources for vehicle buyers, detailing the car-buying process. Core finance terms you need to know include:

Amount Financed: The dollar amount of the credit or loan you're receiving.

Annual Percentage Rate or "APR": This is the cost of credit, for one year, stated as a percentage.

Assignee: The bank, finance company or credit union that purchases your loan contract from the dealer.

Credit Insurance: This insurance coverage is optional, and pays your loan installments or balance if you die or if something happens and you're left disabled. You should receive a written disclosure of the terms and cost for this insurance. Understand how credit insurance works before you agree to it and sign the contract. 

Down Payment: An initial amount paid on your vehicle; you finance the rest of the purchase price and costs for optional items. Ask if your interest rate varies based on your down payment amount.

Extended Service Contract : This service or maintenance contract is an optional item. The contract provides you with extended service or "warranty" coverage. The terms, coverage and cost can vary a lot. Think about your needs before choosing an extended service plan. You can usually choose the length of the contract, what systems and equipment are covered and whether you'll have to pay a deductible.

Finance Charge: The total dollar amount you pay to use credit. It's what the loan costs you.

Fixed Rate Financing: The finance rate is set and can't change over the life of your loan.

Guaranteed Auto Protection  (GAP): Optional protection that pays the difference between the amount you owe on your vehicle and your insurance payout if your vehicle is stolen or destroyed before you've paid off your loan. Give more thought to this coverage if you're making a small down payment and a long loan term.

Monthly Payment Amount: This is your monthly payment. Don't base your loan decision on the monthly payment alone. Balance all factors.

Negotiated Price of the Vehicle: The purchase price of the vehicle agreed upon by the buyer and the dealer.

Variable Rate Financing: The finance rate varies and the amount you must pay changes over the life of the contract.

If you've put a lot of time into searching for the perfect vehicle at the right price, remember your job as a smart consumer doesn't end until you're out of the finance office. Understand your loan terms, take the time to read your sales and finance documents and don't be shy about asking questions. Then enjoy your new vehicle!

Questions for Your Attorney

• I don't agree with the final payment amount for my car loan; how do I resolve the disagreement efficiently?
• I don't understand the acceleration clause in my car finance contract. Can the lender repossess the car if it feels insecure about the loan?
• My credit reports don't show the correct and timely payment history for my car loan, how can I get this fixed?

Related Resources on Lawyers.com^sm

- Contact a Consumer Law Lawyer in your area for specific legal advice, and read about Selecting a Lawyer
- Need a form? Access hundreds of Personal Legal Forms, including this Complaint Letter to a Company
- Read Vehicle Warranties, Checklist Things to do Before You Buy a Car or access more Consumer Law articles and information
- Legal Dictionary
- Visit the Legal Forums for discussions on Consumer Law - Automobile topics