Car shopping explained

Car shopping language-

car shopping terminology

In the auto industry, we often use terms and words that are not used very often outside the car industry. This is your guide to understanding what all of it means.

MSRP – Manufacturers Suggested Retail Price- 

Monroney sticker/label– The actual name for the vehicle is “window sticker” on a new vehicle. Name after U.S. Senator Mike Monroney. In 1958 the Automobile Information Disclosure Act was created, prohibiting the label from being removed or altered before being sold to the end consumer. Car and Driver has a great history of it here.  

Buyers Guide or FTC sticker- All Pre-owned vehicles (used) need a window sticker called the “Buyer Guide” required by FTC.  

VIN– vehicle identification number. 

Standard Equipment– All equipment included at the base (or starting) price of a new vehicle straight from the factory. Basic examples of this are power windows, power locks, airbags, air conditioning, and wheels with tires. 

Destination and Handling charge– This is the separate charge on the window sticker(or Monroney label) included in the total MSRP  on a new vehicle that is passed on to the consumer to ship the car to the dealership from the factory. This can vary depending on the vehicle and manufacturer, but they typically are $800 to up to $2000, depending on where the final assembly point is. For example, a car from Germany will have a much higher destination charge than one from Michigan. Most average this cost across their line to offset the more costly shipping costs of cars produced outside the US or across the country. Insider tip- The dealer ALWAYS pays this if they want the car. The manufacturer will NOT negotiate the destination charges with the dealer to pass on as savings to the customer. 

Total vehicle price– This is the total price on the window base plus all factory-installed options and packages. 

Worksheet– In the auto business, this is the document we use to present the numbers to a potential customer. This is the form that the salesperson uses with a customer to agree on the price and terms of the sale. This could vary from state to state, but it is only an initial agreement by both parties, the dealer and the customer. This is the final and binding form in the purchase order almost always signed in the finance office. 

Purchase order/ Buyers order– This is the legal and official document form that you are buying X vehicle at the terms as stated. The buyer’s order is the primary document with all the titling information, VIN number, miles for both the car purchased and the trade, the purchase price and trade value, all taxes, and all fees(excluding any loan or financing fees). This form will also have any rebates and any money that has or will be collected for that transaction. Insider tip- Mistakes or changes on this form are hard to fix or get changed, to sum it up, ensure that EVERYTHING on this form is correct when you sign everything! 

Selling Price– The selling price is the amount the dealer is charging you for the vehicle or the agreed-upon(negotiated) amount. 

Document Fee– “Doc fee,” for short, is the fee that the state allows the dealer to charge per vehicle transaction to help cover ancillary expenses that a dealer has a part of selling the vehicle. This fee can vary from state to state, and changes (consistently have) increased over the years. So the number one question I get asked is, do I have to pay the Doc Fee?  More on that soon…

Payoff -This is the amount to “payoff” the loan or leases on your vehicle in full to obtain the title. On a lease, it is sometimes referred to as a buyout. 

Buyout– The buyout usually refers to a lease payoff in full but is also used as a term to describe the total amount of payments and fees to end or turn in a lease.  Ensure you clarify what the dealer references when they use buyout when a lease is involved. This term is also sometimes used to describe the amount you must pay at the end of a lease or before if you want to purchase the vehicle you are leasing. 

Residual– is the predetermined future value of a lease or the vehicle’s end value at the end of the term after all payments are made. More on that soon…

Purchase option– This is the amount you can purchase the lease (or Ballon) out at the end. Depending on the leasing company, This can sometimes be a different amount than the “residual” value. 

Purchase Fee– Some leasing companies charge a “fee” to buy out the lease. This is added to the residual amount at the end of the lease or to the remaining balance if the lease is not at maturity (the end). 

Disposition Fee– Most banks or leasing companies charge a fee at the end of the lease if you just turn the vehicle back into them. Most banks will waive if you are releasing another car with them. You do not have to pay this if you choose to purchase your lease. 

TTL– “Tax, “Title,” and “License” often abbreviated to TTL

Out the door– Widespread phrase used to describe the TOTAL price, INCLUDING all taxes and fees. This would represent the total amount due to the seller and nothing more. This is our best OTD (abbreviated) price. Give me your best “Out the Door” price. 

Upside down– Dealers have used this to describe a situation where the loan amount exceeds the vehicle’s value (or trade). For example, if you owe $10,000 to pay off the loan, and the value is $7,500, you would be “upside down” $2,500. “Negative Equity.” is another term that describes owing more on your loan than your car is worth. 

Negative equity– Dealers have used this to describe a situation where the loan amount exceeds the vehicle’s value (or trade). For example, if you owe $10,000 to pay off the loan, and the value is $7,500, you would have $2,500 in “Negative Equity.” “Upside down” is the slang term often used to refer to “negative equity.” 

ACV– The acronym for Actual Cash Value, the actual vehicle value is usually used to describe the value of a used vehicle. In many transactions, a dealer will “over-allow” show a higher value than a trade is worth to that dealer. So A.C.V. is the real value to the dealer and or market. 

Over Allow– Dealers often “Over Allow” to make a deal on a trade-in. This means the dealer is taking profits from the selling vehicle and moving it to the trade to “show” a better value. 

Wholesale– the amount a vehicle is worth at an auction or on the “wholesale” market. That is what one dealer would sell a car to another dealer for. 

Wear and Tear– typically used on a lease contract to describe the blemishes a vehicle should have after a certain amount of time and mileage. This is very subjective, but it would include everything that has been used, brakes, tires, fluids, etc., as well as marks or any damage on the car that was not there if it was new, such as chips, dings, dents, scratches, etc. 

GAP– is the abbreviation for Guaranteed Asset Protection. This is an insurance policy that covers any difference between the amount you owe on your loan or lease versus the amount the insurance company will give you in the event of a total loss or accident where the insurance company considers your vehicle totaled. Inside tipThis can be purchased through the dealership or your insurance company, so compare prices. Many lease companies include this as a part of the lease agreement. It is crucial to have on a lease. On a purchase, I highly recommend GAP coverage if you have rolled money from your trade into the new loan. GAP is also worth considering if you put little money down on a loan or purchase and your fianced amount is close to the sale price or more. 

Rebate– A rebate is an incentive the manufacturer offers the customer as additional savings to sell a vehicle. The term rebate is almost always associated with a New car. The manufacturers will advertise all available rebates, generally on the OEM website. Not all dealers list these rebates on their websites, so check on each vehicle you want to see what is available. Insider Tip- Rebates are almost ALWAYS shown as a separate line item or down payment. Always check ALL rebates to know what you qualify for. Many rebates can be combined with others. Make sure that the dealer is transparent on what rebates you can use vs. what they offer as a discount off the sale price. 

Dealer cash– This is similar to a rebate; however, the dealer has the choice of whether to pass it on to the customer. Unlike a “Rebate” dealer, cash must not be disclosed to the customer. Instead, it is an incentive given to the dealer to help sell a particular vehicle. Insider tip- Dealer cash is almost always taken off the sale price of a car as a discount. Dealer cash is not advertised, so it is hard to find a sold source disclosing whether it is available to a dealer. Dealer cash is NOT as common as rebates. 

Flex cash– This is another type of rebate to the customer where the dealer has a choice on whether or not they can or will use it. Insider tip- Many “flex cash” programs are limited to a specific cash pool. Once the dealer has used their allowance, there is no more. So if this is offered, wrap something up sooner than later so you don’t miss out. 

Loyalty– In the automotive world, loyalty refers to loyalty to a particular brand. So if you own a Ford, you are currently “Loyal” to Ford. It usually refers to the most recent vehicle ownership. If you have a Ford, you are NOT loyal to Chevy, even if you had one before. All manufacturers have their guidelines for what is “loyal.” 

Conquest– Refers to competitive models of a particular brand. Ford F150 truck is a “conquest” to Chevy Silverado, and Honda Accord is a conquest to a Toyota Camry. 

Term– Refers to the amount of time, usually in months, that a loan or lease is, a 36-month lease term or 60-month finance term. 

Walk-around– Is used to describe the presentation of features a salesperson reviews with a customer about the vehicle. They walk around the entire car, explaining many or most of its features of interest.

Delivery– Most think this is an actual delivery like FexEx or Amazon package getting dropped off at your home. In the automotive sales world, this is the time you take ‘delivery” of the vehicle you purchased. This is a step in the buying process of getting a new(new to you) car, just like the “closing” on a new home, this is when all of the titling paperwork, as well as financing paperwork, is completed and you take home your new vehicle. Along with the final paperwork, someone should review all the features with you and ensure you understand your new car’s operation. Usually done by your salesperson; however, some dealerships have people trained just for this step. Insider tip- Picking up your new vehicle takes some time. On average, it can take one to two hours to complete everything. Reviewing everything on a new or newer car with many features and technology can take a couple of hours, not even factoring in getting all the paperwork signed. So allow yourself enough time. Many dealerships also offer a re-delivery, so go back over and review features after you have driven the car for a few weeks or so. LASTLY, it is your salesperson’s job to review your new vehicle with you, not Youtube, so make sure that you are not just letting them off the hook and trying to find how to use everything on your own. 

Trim– Refers to the specific options packed together by a manufacturer. These will have many different names and acronyms. For example, terms like “Limited,” “XLS,” “Sport,” “Premium,” “SE,” “EX,” and “LT” are examples of terms used to describe the “Trim” package. 

MY– Model Year. Often used with the year of the vehicle, 2023MY, describing the entire time that one was made, most cars rarely follow the calendar year, so a 2023 model usually comes out in mid to late 2022 to the same time in 2023, thus the 2023 model year.  

Detail– An extensive cleaning of the entire vehicle. This includes the exterior, interior, engine, and trunk or cargo area. The goal is to get it close to new, as it can get less physical wear and tear. Most dealerships have staff that are experts. 

Reconditioning– or “Recon” for short- is getting a used vehicle serviced, cleaned (detailed), and ready for sale. This process can vary based on the specific dealership standards.