Glossary of Auto Terms
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When buying a car, you may at times hear a word but you just don't know what it means. We have compiled a glossary of terms used in the automotive industry to help you when buying your next car. Click on one of the letters above (definitions are grouped alphabetically).

          

Late Charge
A fee charged if you don't pay your bill on time.

Late Payment
A payment that is received past the due date.

Late Payment Fee
Your lender will charge you a fee when you don't pay your bill on time.

Lease
A form of rental which you use a vehicle for a period of time in exchange for making payments to the leasing company. In a lease, the leasing company continues to own the vehicle.

Lease Bonus Cash
Cash available to a car buyer as an incentive to lease a vehicle. It can be used with other lease offers and promotions such as low rate financing or rebates.

Lease Cash
Cash provided by the car manufacturer to be used toward the customer’s lease.

Lease Extension
The continuation of an existing lease, at the original monthly payment, usually on a month-by-month basis.

Lease Option
A written agreement in which an owner allows an individual to use a property in exchange for rent, and also gives that individual the right to buy the property for a specified price within a specified period.

Lease Pull Ahead
Payments are paid by car manufacturer (i.e. Ford, Toyota, etc.) for a pre-determined period of time at the end of the contract. Lease pull-ahead is when payments are waived on the back end to bring an existing lease customer into a new vehicle faster. (i.e. You want to turn your car in early and lease a new one.)

Lease Rate Discount Offer
Where a percentage discount is offered to the qualifying customer's lease rate at which they are leasing the vehicle.

Lease-like Loan
Also known as payment saver loan. It combines features of a lease and a conventional auto loan and is most often offered by credit unions. Payments can be as much as 30 percent less than a conventional amortized loan, because a lease-like loan has a big balloon payment at the end. Requires no down payment or security deposit. Mileage allowance is usually higher. At the end of the loan, the borrower can sell or trade in the car and pay off the loan balance, or keep the car and refinance the amount owed, or return the car to the lender as payment for the balance.

Lender Bonus Cash
Cash provided by a car manufacturer's (i.e. Ford, Toyota, etc.) lending arm, such as Ford Motor Credit or Toyota Financial Services. Can be used with other finance and lease products offered by the captive finance institution.

Lessee
The individual who signs a lease.

Lessor
The individual who grants a lease.

Liability Insurance
The part of an auto insurance policy that covers the injuries and damage you cause to other drivers and their vehicles when you are at fault in an accident. If you are taken to court, liability coverage will apply to your legal costs. Most states require drivers to carry some amount of liability coverage.

Lien
A legal claim against property for payment of a debt or for services rendered. One who holds a lien has the right to sell the property to obtain the money, or to recover the money when the property is sold.

Loan
A form of financing in which you borrow money that allows you to purchase a vehicle.

Loan Application Fee
A fee charged by a lender for accepting a document in which a prospective borrower details his or her financial situation to qualify for a loan.

Loan Commitment
A lender's promise to advance a specific amount of money on specific terms.

Loan Origination Fee
A fee charged by a lender for underwriting a loan. The fee often is expressed in points. A point is 1 percent of the loan amount.

Loan Processing Fee
A fee charged by a lender for accepting a loan application and gathering the supporting paperwork.

Loan-to-value Ratio
The percentage of an item's price that is paid for by a loan. On a $100,000 item, like a house, if the buyer makes a $20,000 down payment and borrows $80,000, the loan is 80 percent of the price of the item, making the loan-to-value ratio 80.

Low-Interest Financing
A loan offered by the manufacturers Captive Finance Company, at a below-market interest rate. Normally eligibility is limited based on the customers credit worthiness.

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