Finance 101: Car-Buying Terms Decoded

Dealers hide behind jargon. Here’s how to call their bluff with plain-English definitions you can actually use.

In our GoGoGirlGo survey, women told us the finance office was where the wheels came off. It wasn’t the test drive or the sales floor — it was the moment the numbers started flying. APR, residual value, money factor, loan-to-value… The jargon alone was enough to make people sign just to get out of the room. This glossary strips out the smoke and mirrors. Use it to decode the terms you’ll hear, know exactly why they matter, and make smarter decisions in the moment.

Key Terms You’ll Hear:

APR (Annual Percentage Rate)

Plain English: The interest rate you’ll pay on a loan.

Why it matters: Lower APR = less money to the bank. Even 1% can add up to hundreds (or thousands) over the loan’s life.

MSRP (Manufacturer’s Suggested Retail Price)

Plain English: The “sticker price” printed on the car.

Why it matters: It’s a starting point, not the final price. Most buyers pay below MSRP — unless demand is sky-high.

Out-the-Door Price

Plain English: The true bottom line — car + fees + taxes.

Why it matters: Dealers love distracting you with monthly payments. OTD keeps the math honest.

Residual Value (lease term)

Plain English: What the car is expected to be worth at the end of your lease.

Why it matters: Higher residual = lower monthly lease payment.

Money Factor (lease term)

Plain English: The interest rate of a lease, written as a tiny decimal (like .0025).

Why it matters: Multiply by 2,400 to see the “real” percentage. (.0025 = ~6% APR.)

Loan-to-Value (LTV)

Plain English: The size of your loan compared to the car’s actual value.

Why it matters: High LTV = more risk, which can mean higher rates or denied financing.

Rebate / Incentive

Plain English: Discounts from the manufacturer to sweeten the deal.

Why it matters: Stackable with negotiation. Don’t leave money on the table.

GAP Insurance

Plain English: Covers the “gap” if your car is totaled but you still owe more than it’s worth.

Why it matters: Useful if you have a small down payment or a lease. Optional otherwise.

Extended Warranty / Service Contract

Plain English: Extra coverage for repairs beyond the factory warranty.

Why it matters: Often overpriced at dealerships. Always compare third-party options first.

Excerpt: The finance office is where most women told us they felt lost. This glossary translates dealership jargon into plain English, so you can feel confident and in control before you sign.