New Car Glossary

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A guide to common new car terms


Asking Price

The original price requested by a seller before any discounts have been accounted for.

Auto Insurance Broker

A middle man that does not work exclusively with one insurance provider but rather one that works across multiple auto insurance carriers to construct policies and coverage for policyholders. 

Base Price

The cost of a car with standard factory equipment, warranty and freight charges included.  A car's base price excludes optional equipment.

Bill of Sale

A document that highlights the details of a car sale, usually prepared by the dealer from which a vehicle is purchased.

Body Style

The exterior shape of a car, usually defined as coupe, sedan, truck, etc.

Bumper to Bumper Warranty

A guarantee that covers repair costs for an entire vehicle during a specified period of time.

Captive Insurance Agent

A representative that works exclusively with one auto insurance provider to construct policies and coverage for policyholders. 

Car Lease

A contract between a lessor and a lessee over a specific period of time in which monthly payments are made to the lessor by the lessee for the use of a vehicle and in which the title remains in the lessor's possession as owner of the car.

Collision Insurance

Insurance that covers damage to a vehicle if it collides with another vehicle or object. 

Complaint Ratios

A measurement used by various state insurance departments to track consumer complaints against insurance companies.

Comprehensive Insurance

Insurance that covers damages to a vehicle beyond the owner's control, such as flood, hail, fire or theft.

Credit Report

A record of an individual's borrowing and payment history, including information about late payments and bankruptcy.

Credit Score

A numerical score provided on a credit report that establishes the credit worthiness of a person based on the individual's borrowing and payment history.

Dealer Installed Options

Optional equipment installed by a dealer, such as rust proofing or fabric protection. 

Dealer Invoice

The amount auto manufacturers charge to dealers for cars, including optional accessories.

Dealer Preparation Fees

The costs associated with prepping a car for sale, such as interior and exterior detailing.


The out-of-pocket portion of an insurance claim that is not covered under the insurance policy.


The diminished value of a car over time due to factors such as age, mileage and condition. 

Destination Charge

The cost associated with delivering a car to a dealer, paid for by the dealer to the manufacturer. 

Direct Insurance Carrier

An organization that sells insurance direct to consumers, typically online.

Disposition Fee

The fee a leasing company may charge for retrieving a car at the end of a lease. 


A state's Department of Motor Vehicles.

Down Payment

The portion of the purchase price of a car paid from the buyer's own funds as opposed to the portion that is financed.

Excessive Mileage Charges

The fees assessed by a leasing company if a lessee drives a car more than the miles stipulated in a leasing contract.

F & I

The acronym for finance and insurance, or the paperwork labor involved with the sale of a car.

FICO Score

A credit score or number representing the credit worthiness of a person based on the individual's borrowing and payment history.

Finance Charge

The cost of credit, or the cost of borrowing, that includes interest and other charges such as financial transaction fees.

Fuel Economy

A unit of measurement of the amount of fuel needed to power a vehicle over a certain distance.

Green Cars

Cars that are friendlier to the environment than conventional gasoline-powered cars.  Green cars usually consume less petroleum than conventional cars, or use renewable energy sources for power versus non-renewable energy sources.

Hybrid Cars

Cars that are powered by both an internal combustion engine and an electric motor.

Incentives and Rebates (Current Offers)

Special savings programs offered by manufacturers to consumers on specific new car makes and models, also known as current offers or special offers. 

Interest Rate

The price paid for the use of borrowed money; the amount a lender charges for the use of its funds.

Invoice Price

The initial price manufacturers charge dealers for cars, including destination charges.  The invoice price, however, may not include any allowances or discounts the dealer receives.

Lemon Law

State law that protects consumers against the purchase of a defective vehicle.

Liability Insurance

Insurance that protects the policyholder against bodily injury or property damage caused to another person.


A third party's legal right to property, to ensure the repayment of a loan or outstanding debt.

Loan Term

The length of time a borrower has to repay a loan.

Manufacturer's Suggested Retail Price (MSRP)

The price at which manufacturers recommend dealers sell cars.  Base MSRP includes standard equipment but excludes taxes, transportation and destination charges.

Market Value

The price at which a car would currently sell.

Medical Payments Insurance

Insurance that covers a policyholder's medical or funeral costs beyond that covered by Personal Injury Protection insurance, in the event of bodily injury or death caused by an accident.

Miles per Gallon (MPG)

A unit of measurement of the distance a vehicle can travel on one gallon of gas.

Monthly Payment

The amount of principal, interest and taxes paid monthly on an auto loan.

New Car Financing

A sum of money lent, with interest, for the purchase of a new car.

New Car Purchase Request

A request to initiate the purchase of an automobile; a document containing vehicle make, model and trim information, as well as contact information of the interested buyer, typically submitted via the Internet and then routed to an appropriate automotive dealer in the buyer's market area for fulfillment of the vehicle request.

Optional Equipment

Equipment or features of a car that are not part of the standard package.  Optional equipment can be ordered for additional expense, either individually or as a package.

Personal Injury Protection (PIP)

Car insurance that covers costs such as medical expenses, loss of income and funeral expenses for the policyholder, regardless of who is at-fault in an accident.


The individual that holds the insurance policy of a car; the person(s) covered under an auto insurance policy.


The initial amount of a loan upon which interest is calculated.

Resale Value

How much a car is worth in the future, taking into consideration factors such as supply and demand, the type of car, the condition of the car, the mileage of the car and extraneous market conditions at the time of resale.

Residual Value

The depreciated value of a car at the end of its lease term. 

Sticker Price

The price at which manufacturers recommend dealers sell cars, also known as Manufacturer's Suggested Retail Price (MSRP).


A legal document establishing a person or a business as the legal owner of an automobile.

Total Cost of Ownership

The purchase price of a car plus the total costs associated with operating that car over its lifetime.

Trade-In Value

The price you can expect to receive from a dealer when you trade-in your car towards the purchase of a new one.

Uninsured/underinsured coverage

Insurance that covers the costs associated with an accident in which the policyholder is not at fault and in which the other driver isn't insured — or doesn't have enough insurance — to cover the damages or injuries the policyholder sustained. 

Vehicle Identification Number (VIN)

A unique number assigned to a car, commonly found on the left hand side of the dashboard, that identifies characteristics about the car, including the manufacturer, year, model, body style, engine specifications and serial number.


An oral or written guarantee that a vehicle will meet certain specifications or will function or perform as specified.

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