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School Yourself on Auto Finance Terms

Gearing up to refinance your ride can seem daunting. Sometimes, reading about auto finance can feel like studying for an exam in a class you’ve never attended. And since so many processes are being done digitally these days, it can feel like there’s no one around to ask.
If you’re looking to refinance your vehicle but feel a bit in over your head, brush up on some auto finance terms you’re likely to hear or see as you go through the process of refinancing your auto loan or purchasing a leased vehicle at the end of your lease. Simple interest The accrual method lenders, including Mode, use to calculate daily interest on the unpaid principal balance of a loan. With a simple interest contract, you aren’t charged interest on interest (that would be compound interest), which is great news. Your monthly payment is applied first to the amount of interest accrued that month, then to the principal. Annual Percentage Rate (APR) The cost of credit — including the interest rate and other charges — expressed as a yearly rate. Acquisition fee An administrative fee charged by a lender to cover the costs incurred for a lease. Also called an origination fee. Not all dealers charge this, so shop around. Down payment The money you pay upfront when leasing or purchasing a vehicle. The more you “put down,” the less you’ll end up borrowing and the lower your monthly payment. Guaranteed Asset Protection Often referred to as “GAP,” this is an optional product that can help cover the difference between what you owe on your vehicle and what your insurance company will pay in the event your vehicle is damaged, stolen or totaled. Fun fact: GAP is available when you refinance through Mode. Vehicle Service Contract Sometimes called an “extended warranty,” or “VSC,” this is an optional service contract that will repair or replace covered parts in the event of mechanical failure. As opposed to a warranty, which comes with a new (and sometimes used) vehicle and is included in the price of the vehicle, a VSC with Mode may be purchased at the time of financing. And guess what? Like GAP, VSC is also an option when you refinance with Mode and can be folded right into your monthly payment. Lienholder In auto finance, this refers to the financing source (or lender) that helps you purchase a vehicle. While you are the registered owner of your car, truck or SUV, the lienholder is essentially the legal owner until the vehicle is paid off. Ready to put what you’ve learned into action? Time to get Mode, the digital way to refinance your auto loan or, if you’re a GM Financial customer, purchase your leased vehicle simply by going online. Mode is backed by GM Financial, so it’s financing you know you can trust. By Taylor Provost, GM Financial
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