Making sense of dealer-speak.

Dealer Holdback: A small percentage of a vehicle’s cost that a manufacturer pays back to a dealership after the vehicle has been sold. This is what allows dealerships to sell vehicles at invoice price or below and still make a profit.

Dealer Incentives: Special offers from car manufacturers to their dealers—which are usually passed on to the customer—to encourage sales in a slow market or when excess inventory builds up.

Dealer Invoice: The amount a manufacturer charges its dealers for a car.

Handling Charges: Charges—usually negotiable—added to the purchase price of a new car to cover the cost of preparing the car for sale after its transport to the dealership.

Destination Charge: The amount charged for transporting new cars from the factory to the dealership. The destination charge on the dealer invoice is not negotiable, but you should never pay any added destination charge tacked on by a dealer, unless you've requested and agreed to such a charge for a vehicle that must be transported a long distance from another dealer.

Documentation Fee: Charges intended to cover the cost of processing the paperwork involved in the sale of a car. Many fees charged by dealers are negotiable.

Rebate: A partial refund on a new-car purchase offered by the manufacturer or dealership in order to increase sales. Rebates can either be deducted from the purchase price or refunded by mail after the sale has been completed.

Ex-Factory Price of Car: It is the price Car Dealer pays to Manufacturer to lift the car from them i.e. it is the price at which a car manufacturer sells the car.  Ex-Factory Price Terminology is not so common as it is between the Manufacturer, Dealer.

Ex-Showroom Price of Car: Ex-showroom Price of Car is the price at which a car dealer sells a car to Retail Customers which includes Dealer Margins, Transportation costs and applicable Excise, State Taxes and Octroi Charges. Ex-showroom Price is called the basic price of the asset exclusive of any registration, insurance or loadings.

Basic Auto Insurance Policy

Your auto policy may include six coverages. Each coverage is priced separately.

1. Bodily Injury Liability

   This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

   It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

2. Medical Payments or Personal Injury Protection (PIP)

   This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

3. Property Damage Liability

   This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.

4. Collision

   This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.

5. Comprehensive

   This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

   Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

Loan

Annual Percentage Rate (APR): Also called a finance rate, this is the interest rate on a loan; a percentage of the amount borrowed that a lender charges annually for the use of its money.

Equated Monthly Instalment(EMI): The full form of EMI is Equated Monthly Instalments. It is an amount repaid by a borrower to the lender along with the agreed interest.

EMI = P(r(1+r)n / (1+rs)n-1)

Cost of Funds: An APR, a money factor, or a rent charge, this is the charge for using the bank’s—or another lender’s—money to acquire the car. Also known as financing costs.

Default: Failure to make payments or otherwise abide by the terms of a financing contract.

Down Payment: Cash paid up-front by a borrower to reduce the amount financed in a lease or loan. While a large down payment can reduce your monthly payments.

Early Termination Fees: Penalties paid for withdrawing from a loan ahead of the scheduled end date. Typically, these penalties are very large—akin to simply paying off all remaining payments without the use of the car. These may apply if a vehicle is stolen or totalled and you don't have gap insurance.

Finance Rate: Also called an “annual percentage rate”; the interest rate on a loan. A percentage of the amount borrowed that a lender charges annually for the use of its money.

Gap Insurance: Insurance that covers the difference between a vehicle’s depreciated value in a loan and the amount owed on it in case it is stolen or totalled, a difference the owner or lessee would otherwise have to pay the lessor.

Pre-Computed Interest: A loan in which the total interest is calculated in advance and an equivalent percentage is baked into each monthly payment. If you pay off your principal early, the remainder of these charges should be refunded.

Prepayment Penalties: Charges for paying off a loan early. Because early payment minimizes your total cost of interest, paying off your principal early is usually a good idea. People with good credit and who qualify for good loans shouldn’t have to accept prepayment penalties.

Pre-Qualify: To have a lender confirm you are eligible for a loan without you committing to accepting it.

Principal: The amount borrowed.

Term: The length of a loan usually in years.

Secured Loan- Secured Loan is the loan that is sanctioned by the bank after a security is provided by the customer to get the loan.

Unsecured Loan- Unsecured Loan is the loan that is sanctioned by the bank without providing any security.

Loan Amortisation- Every time you make an EMI payment, you pay down some of the loan (the principal repayment), and also pay for the cost of the loan (the interest cost). This results in a gradual reduction to the principal amount of a loan. This process of paying down the loan is referred to as the process of amortisation.

Repayment Scenario- For most loans, there is a set schedule according to which you repay your loan using the EMI payments. There are three things you should be aware of:

Default- Untimely or irregular payments can bring you in the default category and affect your credit history. On the other hand, failure of payment of a home or car loan can also mean the lender taking over the legal rights for your house or car.

Change in EMI- If you have floating rate loan, your EMI amount is subject to change if interest rates change in the market.

Charges involved for lump-sum payments- If you choose to make a lump-sum prepayment on your loan, you may have to pay a 1 per cent to 3 per cent penalty charge to the lender along with some administrative charges and fees for early repayment.

Guarantor- When you take a loan, you might be asked to have someone as a guarantor to that loan, in case you default on the loan.