Getting an auto loan in Middle Tennessee can seem like a long, complicated process filled with jargon you don’t understand. However, an auto loan can be a valuable financial tool that saves you in a crunch or gets you one step closer to your desired lifestyle, especially if you manage it correctly. As a Tennessean, we don’t need to tell you that having a vehicle is almost a necessity.

There are 40% more registered cars in the 41 counties that make up Middle Tennessee than there were in 2016, according to Tennessee Department of Revenue Director of Communications Kelly Cortesi. And with Tennessee anchoring the most recent list of the top 20 states with the most auto loan debt, it’s important for consumers to understand the words and phrases you’ll only encounter during the auto loan and car buying process.

An Auto Loan Dictionary

Whether you are in conversation with a car salesperson or perusing vehicle purchase stickers, you will likely hear and see the following language. Knowing what it means and how it could impact your financial decision can help you proceed with your car buying adventure with confidence.

Annual Percentage Rate (APR): With an auto loan, the APR includes the amount of yearly fees and interest on your car purchase. The measure reveals the total cost of financing the vehicle and is helpful to compare as you shop around for auto loans.

Credit Score: The results of your credit report guides lenders towards selecting an appropriate interest rate for your loan. With a lower credit score, you can expect to receive a higher interest rate. To ensure you get the best deal, we recommend that you grow your credit score as high as you can because it will save you more money in the long run. You can even use a service like US Community Credit Union’s (USCCU) IDProtect to not only guard your accounts and information from fraud, but also to check and monitor your credit score as you work to improve it.

Pre-Approval: Many lenders, such as USCCU, offer pre-approval so you can understand your budget and best case auto loan scenario before you ever test drive a vehicle.. Pre-approval can also be used as a bargaining chip, especially at the dealership, as well as a compass to help you determine where to start and where to draw the line when it comes to what you can afford. With a rate and loan limit already designated, you hold negotiating power during the auto loan buying process. In addition, getting pre-approved allows you to conduct your car search with confidence in your budget and options.

Taxes and Fees: You will likely see a vehicle registration fee, sales tax, documentation fees, dealer fees, and advertising fees on your final car contract. Be prepared for this as, according to Edmunds, Tennessee’s maximum sales tax is 10% and there are no documentation fee limits, with the average cost being $500. Remember, the number you see on the sales tag in the window in the vehicle is the advertised price before all taxes and fees.

Down Payment: To lower your overall fees and rates, you can put a down payment on the vehicle upfront at the time of purchase.

Trade-In Value: If you plan to trade-in your current car, research how much your vehicle may be worth with a tool like NADA. The dealer could pay you a certain amount for your vehicle, which you could put towards your new or used car purchase.

GAP Insurance and GAP Advantage: This is an optional form of protection against your new or used vehicle loan, which covers you should your car get stolen or totaled. It’s particularly advantageous when the amount you owe on your auto loan exceeds the value of the vehicle. Lenders, like USCCU, will actually offer GAP Advantage as an additional way to help protect your vehicle loan. When you purchase a new or used vehicle, GAP Advantage protects your investment against any possible financial loss due to an accident or theft. It helps cancel the difference between the primary insurance settlement and what you may still owe.

Warranty: Vehicle manufacturers provide warranties in order to ease the minds of consumers who are making a large investment. For a limited amount of time, the manufacturer guarantees in writing to cover some parts of your vehicle should they need repaired or replaced. Before signing for a vehicle, check the terms of your warranty, specifically how long it lasts and what parts it covers. You may want to consider an extended warranty if the manufacturer’s warranty has expired. Lenders, like USCCU, offer extended warranties sometimes at a lower cost while still providing excellent coverage.

Lending Terms: Factor in how long you can afford to pay for your car. The longer the lending terms, the lower your monthly payments but the higher the overall cost. There are advantages to paying aggressively on an auto loan and choosing a shorter term.

Get Pre-Approved with USCCU

Knowledge is power and now you have the information you need to protect yourself and your purchase. The best way to ensure you get a deal that works for you is to get pre-approved for an auto loan.

USCCU offers pre-approval with a quick turnaround at no cost.. And, don’t forget to take advantage of our robust list of preferred dealers in Middle Tennessee who we’ve worked with for years and trust to provide the best service and experience to our credit union membership.

The Financial Service Representatives at USCCU have assisted thousands of Middle Tennessee residents on how to get an auto loan. Contact us with your questions and details regarding your unique financial situation, and we would be more than happy to help! An auto loan can be the one thing between you and your dreams. So, take the first step today to find an auto loan that empowers you.