pe-file Car Loans

Glossary of Auto Loan Terms (C)

Caps (Interest)
A cap on an interest rate is the highest interest rate that can be charged. This is typically seen when the borrower takes out a loan with a variable interest rate.

Cash Price
The amount that a buyer will pay a seller if there are no financing requirements involved. Sometimes, buyers can negotiate both a better deal on the price of a car. This doesn’t mean that a buyer has to have that much cash at hand. A buyer could also go to a bank, get approval for a loan, then return to make the deal. In that case, the dealer has the full cash price up front and doesn’t worry whether he will be paid. Buyers should be aware that the bank loaning the money will probably require some sort of collateral and the car will likely suit that purpose.

Certificate of Title
A certificate of title is a document that includes all information related to the car, including the VIN number.

Clear Title
A cleat title is just that - clear of any liens. A clear title means that there is nothing owed against the car and that the full value of that car can be considered an asset.

Closed-end lease
A closed-end lease is a lease negotiated between a person who leases a car and the car dealer. In this case, there is a fixed date for the lease to end. At that date, the person leasing the car must either relinquish the vehicle or buy the car outright.

Closing
The closing occurs at that moment the buyer or leasee signs the document that gives him the legal right to the car. The closing may include additional fees above the price of the car and the interest rates. These closing costs are usually justified by the lender as the cost of creating and maintaining the records.

Co-Buyer
The co-buyer is the second person who signs saying that he or she will be responsible for the payments in the event that the main buyer fails to meet those agreements. The co-buyer could be a spouse and a second responsible person is sometimes required by the lender if the purchaser’s ability or willingness to pay is in doubt.

Collateral
Collateral is anything that can be used to help secure a loan. Typically, the car a person is buying is collateral for an automobile loan. In some cases, a person with a poor credit history may be required to put up some other collateral so that

Collision Insurance
Collision insurance provides coverage for the owner’s vehicle. This type of insurance - sometimes called a comprehensive or comprehensive collision policy - will usually pay to repair the owner’s vehicle or will pay fair market value if the car is beyond repair. Another kind of insurance is liability which pays only for damages to the cars and property of others.

Commission
A commission is an amount the car salesman gets upon closing a deal for a car sale. Salesmen in a slump or battling poor economic factors may sometimes be willing to take a lesser commission, providing the buyer with a better deal.

Compound interest
Put very simply, compound interest is the amount of interest that is figured at specific time intervals and that charges interest on the interest that has already accrued.

Comprehensive Insurance
Comprehensive insurance is sometimes called collision insurance. Comprehensive will cover damages on the owner’s vehicle, even if the owner was at fault. Typically, a lender will require some minimum comprehensive insurance policy to protect the lending company’s investment.

Consumer Credit
Consumer credit reflects a person’s credit habits. For example, a consumer credit report will indicate outstanding balances on various credit accounts and the borrower’s repayment habits. Reliable, on time payments tend to raise a consumer’s credit standing and prompts lenders to offer better terms and rates because they feel confident that the borrower will repay as agreed.

Consumer Reporting Agency (or Bureau)
There are three major consumer reporting agencies in the United States. These companies are private and not affiliated with the government though there are laws that regulate business practices. The agencies are required, for example, to change any entry in the credit report that is found to be in error.

Co-Owner
The co-owner is a second person who claims joint ownership of a vehicle. Typically, the co-owner will also be the co-signer.

Cosigner
The co-signer is a person who agrees to be responsible for a loan in the event the buyer isn’t able to make the payments as agreed.

Credit
Credit is a broad term that refers generally to the ability to buy something now but to repay the cost at some later date. Good credit is an asset and should be treated as such.

Credit Bureau
There are three major credit bureaus. All three are privately owned and compile information about credit and spending habits for an individual. Details that might be included on a credit bureau’s report include the number of credit cards held, payment practices and credit that was applied for, even if that request was refused.

Credit Disability Insurance
A credit disability insurance policy makes payments if the borrower is unable to work, thereby falling behind in payments. The insurance is typically not overly expensive but buyers only receive benefits under very specific situations.

Credit History
The credit history is a compilation of a person’s credit, spending and payment habits. The credit history is typically used to determine whether a person is eligible for a loan.

Credit Report
A document compiled by each of the three major credit-reporting companies. The credit report may include a number which refers to the credit score, and will typically include buying, spending and payment habits for the past seven years.

Credit Risk
When a potential lender looks at an application for credit, that person is weighing the credit risk. This is simply a method of determining whether a person is likely to repay the loan.

Credit Score
A credit score is a number that is based on a credit report. The higher the credit score, the more favorably potential lenders look on your request for credit.

Creditor
The person or company that lends money is typically referred to as the creditor.

reditworthiness
When a potential lender is looking over a credit application, he is weighing the creditworthiness. Put simply, the lender judges the credit worthiness based on the borrower’s past credit history. Some lenders put more weight on a credit score while others look more closely at recent trends.

Customer Incentive
When the economic forecast is poor or during seasons that traditionally has few car purchases, dealers and manufacturers look for ways to offer customer incentives. These may be in the form of rebates or may be additional options at no extra cost.