At Springhill Toyota, we want you to feel prepared and confident when financing your new or used vehicle. That's why we've compiled a list of common financial terms that you're probably going to hear when working your way through the finance process. Whether you're learning some of these terms for the first time or are in need of a refresher, we hope you find this list helpful. If you need more information, don't hesitate to reach out to our finance team at any time.

Finance

When you finance your new or used car, this means that you will borrow money from a lender or bank in order to buy the vehicle. The lender is essentially purchasing the vehicle for you, giving you time to pay back the loan — with interest — over a designated amount of time.

Leasing

If you're not ready to commit to buying a new car, you might want to consider leasing. Leasing is basically like renting your car for an extended amount of time since you'll return the vehicle at the end of the lease term. You will have to make a down payment, which is typically 20% of the car's value, and then you'll have monthly payments until the lease is up. Most least terms last 24-36 months, but some may offer a longer lease term. At the end of the lease, you can either return the vehicle or buy it.

Term

A loan term is the amount of time you have to pay back your loan. If you have a 36-month car loan, 36 months is your loan term. If you choose a shorter loan term, you'll have lower interest rates; on the other hand, you'll also have higher monthly payments. You'll want to remember this when making your budget.

Principal

The initial amount of the loan that you're paying off is called the principal. If the vehicle you're considering costs $18,000, for example, then $18,000 would be the principal. Interest will then be based on this amount.

Interest

Interest is the fee you pay for borrowing money and will be included in your monthly car payment. Also known as APR (annual percentage rate), your interest rate will be determined by your credit score, length of the term, age of the vehicle you're buying, etc.

Money Down

The money you pay on a loan upfront is called money down, or your down payment. If the car you're buying is $20,000 and you make a down payment of $5,000, the remaining balance to pay off will be $15,000. You won't have to pay interest on the down payment, and that means you'll have lower monthly payments. However, in order to secure an ideal interest rate, you should expect to make a large down payment.

Cash Back

Cash back is a great incentive to buy a new car. This could greatly reduce the price of a new vehicle — or the dealer may issue a check. If a dealer offers cash back in the amount of $2,500 for a car that's priced at $24,000, for example, you could potentially use the $2,500 as the down payment, which would bring the final price down to $21,500. Or, you could pay full price and pocket the $2,500.

Rebate

A rebate is a lot like cash back, but won't be applied until after you've purchased the vehicle.  After you've signed the paperwork, you'll receive either a check for the rebate amount or cash on hand. While getting cash is instant, you may have to wait on the rebate.

Trade-In

If you're ready to exchange your old ride for a new or used vehicle, you can do so at Springhill Toyota. When the value of your old vehicle is used towards your new purchase, that is called a trade-in. Your trade-in has the potential to save you thousands of dollars on a new or used car. Or, we'll pay you cash instead. Try our Value Your Trade tool to see how much your used car may be worth.

Depreciation

Depreciation is what happens when a new vehicle loses value over time. Depreciation starts occurring as soon as a new vehicle is purchased, no matter its condition. Your new car will actually lose around 10-20% of its value as soon as you drive it off the lot. And no matter how well you take care of your new Toyota, it will lose 60% of its initial value in five years.

Equity

The difference between what your vehicle is worth and how much you have left to pay off is called equity. If you have a vehicle that is worth $15,000, for example, but you still have $6,000 to pay off, you would have $9,000 in equity. Do everything you can to keep this ratio balanced.

Upside Down

What you don't want is negative equity, also known as being upside down. This happens when you owe more on your vehicle than what it's worth. Although this is common, it makes it hard to sell your vehicle. When you finance with Springhill Toyota, we'll do our best to help you make the best financial decisions possible so you won't find yourself in this situation.

If you have further questions about these finance terms, terms not included on this list or financing in general, our finance team is here for you. Contact us at any time or stop by our dealership at 3062 Government Blvd, Mobile, AL 36606. If you're ready to apply for financing, get pre-approved today or try our payment calculator to estimate your monthly payment. We welcome customers from Daphne and Spanish Fort!