Automotive Finance Terms Explained

Although getting a loan for a vehicle has been simplified, there may be terms that are unknown to the potential buyer. Check out the definitions to some of the most common terms. If in the market for a new vehicle, see us at our Fred Mueller Mazda location. Ask us about financing the loan for you.

Amortization simply means the payments containing the principal and the interest. EMI refers to “equated monthly installments.” The loan amount plus the interest and other fees are divided into fixed monthly payments. Since financiers typically only allow loans for up to 90 percent of the vehicle's price, buyers must make up the difference by making a down payment or margin amount.

A flat rate of interest does not change over time. As such, the amount is determined at the time of purchase and divided monthly with the vehicle's value. Financiers hypothecate a vehicle in their name for security until the loan is repaid.



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