Used Car Glossary
Buying Used Cars: Unlocking the Meaning of Key Terms
Consumers shouldn’t have to be acronym experts to buy a used car. But the alphabet soup that comes when consumers buy used cars – MSRP, APR, GAP, NADA, ASE – can leave some people sending out an SOS.
Following are some of the key terms that auto buyers should be familiar with in order to make informed decisions when buying a used car.
Shopping for a Used Car
Certified Used Car: Many manufacturers and dealers evaluate the condition of a used car and “certify” it via an inspection. Most of the inspections performed by manufacturers, dealers, and other used car sellers are rigorous and comprehensive – 100 points or more, including all major systems and components such as brakes, steering, suspension, transmission, electrical, air conditioning, and heating. Certified used cars often come with the same benefits as a new vehicle. When buying used cars, consumers should inquire whether or not the car is certified.
VIN (Vehicle Identification Number): All cars and light trucks built since 1982 have a unique 17-character VIN that provides access to valuable information about that vehicle's history, which could be especially important when you buy used cars. The VIN is found on dashboards, driver's side door jam stickers and title documents.
No-Haggle Pricing: An idea that Enterprise Rent-A-Car founder Jack Taylor helped pioneer in 1962. Other companies have since adopted this practice, where the price marked on a used car is the price for which it will sell – making the process of buying used cars much more consumer friendly. At Enterprise Car Sales, for instance, all of its more than 120 makes and models of high-quality, late-model used cars are priced at unbelievably low prices.
MSRP (Manufacturer’s Suggested Retail Price): This is the price that is typically recommended by a manufacturer for each vehicle. Dealers use this price as a starting point to negotiate the price of the vehicle. To eliminate this aspect of a car purchase and to make sure you are getting a fair deal when you buy a used car, try to develop relationships with dealers like Enterprise Car Sales that offer no haggle pricing.
Limited Powertrain Warranty: This generally covers engine, transmission, transaxle, and drive system – parts related to getting power from the engine to the drive wheels for a time specified in miles and/or months. This is especially important for consumers who choose to buy used car
CARFAX®: If you plan to buy a used car, a quick visit to this company’s web site could affect your decision. CARFAX provides complete vehicle history reports that can uncover costly hidden damages, such as flood damage, odometer fraud, even a vehicle that has been totaled or rebuilt. When buying a used car, consumers can rest assured they are not buying a used car that has been damaged, simply by entering the vehicle’s VIN at www.carfax.com.
When Buying Used Cars
Zero Percent Financing: Consumers should carefully evaluate zero percent financing offers when buying a used car. First, these offers are generally limited to those customers with excellent credit. If a customer qualifies for zero percent financing, the payments can still be pretty steep since many interest-free offers require financing terms of three years or less. Consumers who buy a new or used car are in the best position when they walk into a dealership with financing already secured.
APR (Annual Percentage Rate): This is the yearly percentage rate charged to a consumer to borrow the finance company’s money to buy a used car. APR shows a true finance rate as it includes all of the fees associated with the purchase of the car.
Equity: The value of the used car trade-in, minus the outstanding loan amount or payoff.
GAP Waiver/Insurance (Guaranteed Asset Protection): Waiver/Insurance that covers the "gap" between the actual value of a used car at the time of a total loss, and the amount the owner still owes the finance company. Due to depreciation of new cars and deals like “zero percent financing” and “no payments until next year,” even owners of used cars can be left with thousands of dollars to pay from their own pocket if they do not have GAP waiver/insurance on their loan.
Term: The length of time an individual has to pay back the money that was borrowed to buy a used car. This is generally 12 to 72 months.