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From A to Z, arranged alphabetically. An explanation and meaning of all the financial terms you'll come across in this program, and when dealing with any vehicle financing service provider.

A | B | C | D | E | F | G | H | I | J | K | L | M
N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Acquisition Fee:		A processing or administrative charge included in most lease transactions. It may also be called an administrative fee or assignment fee.
Agreed Upon Selling Price:		The dollar amount you and the dealer determine will be used to calculate financing figures for a specific vehicle.
Agreed-Upon Value of the Vehicle:		The dollar amount you and the dealer determine will be used to calculate lease financial figures for a specific vehicle. In leasing, this figure is similar to the agreed-upon selling price in financing.
Bank Draft:		A bank issued check made out to the dealership for the vehicle purchase.
Budget:		Tool commonly used to measure expenses against income. A written plan that helps people manage their money.
Capacity:		Your ability to pay your debts.
Character:		Where credit is concerned, a person’s reputation for paying bills when due. This is also referred to as your willingness and ability to pay or creditworthiness.
Collateral:		An asset pledged to the creditor until the credit obligation is paid. Example: If you own your home (or another car), it may be used as collateral to secure a car loan.
Co-signer:		A person (co-buyer/co-lessee) who assumes equal responsibility for a contract or lease agreement.
Consumer Leasing Act (CLA):		Requires the leasing company (for example, a dealership), to disclose certain information before a lease is signed, including: The total amount of the initial payment The number and amounts of monthly payments All fees charged The charges for default or late payments For vehicle leases, the lessor must also disclose: The annual mileage allowance Charges for excess mileage Whether the lease can be ended early Whether the leased vehicle can be purchased at the end of the lease The price to buy at the end of the lease Any extra payments that may be required at the end of the lease
Creditor:		A person or organization that regularly extends credit subject to a finance charge and to whom the credit obligation is initially payable on the face of the contract.
Credit Practices Rule:		Requires creditors to provide a written notice to potential co-signers about their liability if the other person fails to pay Prohibits late charges in some situations Prohibits creditors from using certain contract provisions that the government found to be unfair to consumers
Credit Report:		A report about you and your payment history gathered by a credit reporting agency in an organized manner.
Credit Reporting Agency:		A firm that collects, sorts and sells information about an individual’s credit history.
Credit Score:		A numerical score that sums up – at a point in time – what your past and current credit usage predicts about your future credit performance based on statistics. The better your history of credit, the higher your score.
Depreciation:		The amount by which a vehicle is expected to decrease in value over a specific period of time.
Down Payment:		Initial payment, usually a large amount, used to reduce the amount financed.
Equal Credit Opportunity Act:		Prohibits discrimination related to credit because of your sex, race, color, marital status, religion, national origin or age Also prohibits discrimination related to credit if you are receiving public assistance or that you have exercised your rights under the Federal Consumer Credit Protection Act
FACT Act:		Update to Fair Credit Reporting Act of 1971 Addresses problems of identity theft, consumer privacy and inaccuracies of the consumer credit reporting system Provides consumers the right to one free credit report each year Allows consumers to call one number to notify credit reporting agencies and credit card companies of identity theft
Fair Credit Billing Act:		Establishes the process for resolving billing errors on your credit card accounts Gives you the right to know what information is being distributed about you by credit reporting agencies
Fair Credit Reporting Act:		Gives you the right to know what information is being distributed about you by credit reporting agencies.
Fair Debt Collection Practices Act:		Prohibits debt collectors from using unfair or tricky practices to collect overdue bills that your creditor has forwarded for collection This does not apply to banks or other businesses collecting their own accounts, although some states have similar laws that do
Finance Charge:		The total dollar amount the credit will cost you, which is based on the amount financed, length of contract and annual percentage rate.
Gap Protection:		A specialized type of protection that pays the difference between a total loss insurance settlement and the net scheduled payoff. In some cases, the customer may be responsible for the insurance deductible.
Gross Capitalized Cost:		In leasing, the agreed-upon value of the vehicle and any items you pay for over the lease term (such as acquisition fees or insurance).
Installment Sale:		A contract with a dealership to buy a vehicle on time by paying the purchase price, plus an agreed upon finance charge, over a certain period of time in installments, which are typically monthly payments.
Lease:		An agreement between the owner of the property (lessor) and the user (lessee) for the use of a leased vehicle subject to stated terms and conditions for a certain length of time and for an agreed upon payment.
Lease Agreement:		The document that contains the lease terms and conditions of use.
Lender:		A bank, credit union or other financing source that lends money directly to you for the vehicle purchase.
Lessee:		The person who has temporary possession and use of a leased vehicle.
Lessor:		The owner and title holder of the leased vehicle; the person or organization who regularly leases, offers to lease or arranges for the lease of the vehicle.
Lien:		A legal claim on ownership of the vehicle stemming from a debt. If you don’t make the payments, the one holding the lien can take and sell the vehicle as full or partial payment of the debt.
Mileage:		The number of miles per year agreed upon in the lease agreement – usually 12,000 to 15,000 miles.
Permissible Purpose:		The legally acceptable purpose(s) a creditor or organization has to obtain a person’s credit report. Example: When you apply for credit, you are giving your potential creditor the legal right to obtain your credit report.
Rent Charge:		The charge that applies in a lease agreement that is similar to the finance charge on an installment sale contract or interest on a loan. Also referred to as a lease charge.
Repossess:		In the event of nonpayment of your credit obligation, a creditor’s legal right to take the asset you have pledged as collateral and sell it to pay off the credit obligation.
Residual Value:		The end of term value of the vehicle established at the beginning of the lease and used in calculating your base monthly payment. This value may be determined, whole or in part, by using residual value guidebooks (independently published value guides).
Term:		The length of the installment sale contract or lease agreement.
Truth in Lending Act:		Requires creditors to give you written disclosures of important terms of the credit agreement, such as: APR Total finance charge Monthly payment amount Payment due dates Total amount being financed Length of the credit agreement Any charges for late payment
Types of Expenses:		Fixed Expenses: Expenses due at a particular time or on a regular schedule. These expense amounts remain the same or change according to a known schedule (for example, rent or car payment). Flexible Expenses: Expenses that occur by choice and are subject to change (for example, hobbies and entertainment). Variable Expenses: Expenses that take place on a regular basis and are consistent and predictable, but the amounts change (for example, utilities and credit cards).
Types of Income:		Gross Income: Total amount of money earned before any taxes and payroll deductions are subtracted. Net Income: Gross income minus taxes and payroll deductions; your take-home pay. Bi-Weekly Income: Payment every two weeks (for example, every other Friday). Semi-Monthly Income: Payment twice a month, such as on the 15th and the 30th.

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