Explaining Auto Finance Terms

Auto finance can be intimidating. It involves a credit check, not to mention plenty of uncommon words. Our Autohaus BMW decided to explain common auto finance terms as courtesy. Take a look.

The Lender

The lender or the lending institution is the party that gives you the auto loan with which you purchase your vehicle. The lender may be a bank or some other such institution that makes loans of different types. It might be a small credit union or, sometimes, the vehicle manufacturer. Until you pay off the loan, the vehicle technically belongs to the lender.

Amortized Auto Loan

Amortized loans are common in auto financing. This type of loan enables you to quickly pay off loan interest up front and pay down the principal later on in the loan's life. For the first year, say, your lender allots a large portion of your monthly payments for the interest. Later, this switches, ensuring that more of your monthly payment covers the actual loan amount and not just the interest.