Finance Terms Explained in DeLand, FL

Here at DeLand Kia, we understand when customers are intimidated by the car-buying process, especially if it’s their first time. The last thing you want to worry about is the verbiage on your purchase or lease contract while you’re collecting tax forms and past pay stubs or finding a printer for a hard copy of your credit history. And even if you’re a seasoned pro, you might like a little refresher. To help our customers, we’ve listed the most common finance terms that most contracts will have so that you can feel confident during your appointment with us. Car-talk just became part of your vocabulary.

FAQ: Finance Terms Explained


“Finance” is a term that we use frequently, but what does it mean exactly? To finance your vehicle simply means to borrow money to pay for it. You can always use our services here at DeLand Kia, or request a loan from a bank or other lender. Whoever you choose will agree to buy the vehicle for you with the stipulation that you’ll repay the loan over a set period of time and interest rate.


It’s easiest to understand leasing when it’s compared to renting. You’ll pay a down payment (anywhere from 20 percent of the MSRP or lower, depending on which special you take advantage of) followed by monthly payments (or rent) until the end of your lease. The typical time period is 24-36 months, but some can extend to five years. Most vehicles will maintain their factory warranty during the lease, so similar to a landlord absorbing maintenance costs of an apartment or house, you might not have to pay for extensive repairs during your lease.


The agreed amount of time for your loan or lease is called the term. Always make sure your loan term matches your budget — shorter terms mean lower interest rates but higher monthly payments. We can negotiate your term depending on your credit score and history.


The principal of the loan and the MSRP of your vehicle are not the same thing. The principal refers to the amount left to repay after the down payment has been subtracted. For example, if the MSRP of the vehicle you’re purchasing is $24,000 and you place $4,000 as your down payment, your principal is now $20,000.

Money Down

We advise to place as much money down as possible. It’s better for you long-term, even if it takes more time to save now. Money down, or the down payment, is how much money you place up front on the loan. Not only will a sizable down payment lower your monthly payments, but the down payment won’t be charged interest.

Interest Rate

To protect against risky customers who can’t repay the loan, lenders will place an interest rate on the borrowed amount. Also known as APR (or annual percentage rate), the fee is compounded into your monthly payments. APR is determined by your current credit standing, age of the vehicle you’d like, the term length and other factors.

Cash Back

Oh, just wait. Cash back is an incentive from manufacturers or dealers dependent on the purchase or lease of a vehicle. It can climb up to $2,500 or more, which can be used to reduce the MSRP of your car and be used as a down payment. The dealer could also write you a check on the spot.


Not unique to auto incentives, a rebate is from the manufacturer (not the dealer) and is applied to the selling price of the vehicle but only after the purchase is completed. It’s essentially cash back, but rebates may take some time to arrive if they’re mail-in.


For credit towards the purchase of a vehicle from the dealer, a trade-in swaps out your old vehicle for the one you want. It can take up to $1,000 off the MSRP.


Depreciation is the steep decline followed by a steadier decrease of value over time. It affects every car regardless of its condition, and it continues until the value of the car is zero. Typically, a new car will lose 10-20% of its original value once sold, and in five years, the vehicle will have decreased 60% even with regular maintenance and care.


The difference between what your vehicle is worth and how much you still owe the lender is called equity. For example, if the value of your truck is $44,000, but you still owe $12,000 to the dealer, you have $32,000 in equity. It’s essential to quickly gain as much equity as possible early on to balance the ratio of amount owed and amount paid

Upside Down

If depreciation hits your vehicle faster than you can make payments, you might end up with negative equity, or owing more on your vehicle than it’s worth. It becomes difficult to sell your car with negative equity and if you sell or trade your old car for a new one, that debt will follow you. If you find yourself in this kind of debt, our experts here at DeLand Kia will advise you with next steps.

If you have further questions or would like to know more about your finance terms, give us a call or visit us at 2322 S. Woodland Blvd, DeLand, FL 32720. Our experts can go through your questions one by one until you feel more comfortable. We look forward to serving our customers from Deltona, Daytona and Orlando.