Automotive Definitions

From A to Z, we have listed some of the more commonly search automotive definitions for your reference. We even include links to pages dedicated to some specific automotive definitions. For example, if you are needing the definition for dealer holdback, we have it below. Simply click the term "dealer holdback" and you will be linked to a page dedicated just for dealer holdback.

Advertising Fees: These fees cover the cost of advertising. NOTE: These fees do not appear on the vehicle invoice and are typically hidden in the form of an acronym when added to the sales contract. Example: LMDA = Lincoln Mercury Dealer Advertising)

APR: The Annual Percentage Rate is the effective interest rate used to calculate monthly payments on your car financing. This is your cost for financing the vehicle rather than paying cash. Monthly car payments are based on a set number of months and the APR. Typically, car loans are set for 24, 36, 48, 60, or 72 months. Annual Percentage Rates offered to customers will vary based on the customer’s credit history (credit report) and the duration of the loan. Longer loans have higher APR’s. The APR offered to customers with flawed credit is higher than the APR offered to customers with excellent credit history

Carry-Over Allowances: (End-Of-Model-Year incentives) These manufacturer-to-dealer cash incentives are offered on last years models that have not sold yet. Not all dealers will share these incentive dollars with customers. However, some dealers will publicly advertise that they are passing all or part of this rebate on to customers.

Credit Score (also known as: FICO – Fair Isaac Corporation). This score is a number ranging from 300 up to 850 and represents a customer’s credit-worthiness. Customers with a flawed credit history will have a lower credit score than a customer with an excellent credit history.

Dealer Holdback Holdback is a percentage of either MSRP or invoice price (depending on the make of the car) which is repaid to the dealer by the manufacturer after a sale. It is built into the published invoice price. This enables dealers to offer higher financing amounts to customers, reduces the amount of commission paid to salespeople (income is based on profit – holdback reflects a higher cost to the dealer), and allows dealers to sell cars at invoice price and still make a profit.

Extended Warranty This is an insurance policy (not included in the price of the vehicle) that protects you against repairs beyond the typical warranty period. Retail price for an extended warranty is typically $500-$2,000.

Invoice Price: This is the number that dealers would like you to believe that they paid for a vehicle. (This number is now published on several automotive websites.)

Local Incentives: These are offered in the form of cash rebate, low APR, and lease payments. These incentives are also public knowledge and frequently mentioned in local commercials and local newspaper advertisements. These are common on slower-selling vehicles in isolated regions.

Manufacturer to Customer Incentives: These are offered in the form of cash rebate, low APR, and lease payments. These incentives are public knowledge and are frequently mentioned in commercials and/or newspaper advertisements. These are more commonly offered nationally and regionally on slower-selling vehicles.

Manufacturer to Dealer Incentives: These incentives are typically not public knowledge and most are not available on the internet. They can amount to $100,000’s for each dealership and may run on a monthly or quarterly basis. Dealer participation may vary. As mentioned early, dealerships may be compensated based on reaching sales goals and based on C.S.I survey results.

MSRP: (Manufacturer’s Suggested Retail Price - “sticker price”) This is the overly-inflated number that you see posted in the window of a new vehicle at a dealership. This is the price dealers want you to believe should be paid for the vehicle.

Options: Features that may be added to a vehicle. Examples: 6-disc CD changer, power sunroof, running boards, spoiler, cargo net, leather seats, navigation system, rearview camera, or Bluetooth connection.

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