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A Guide to Automotive Finance Terms | North Little Rock, AR

Buying a car is a daunting process, especially if you are not knowledgeable about the finance jargon used when discussing your automotive loan. This guide to automotive finance terms should help you better understand the financing process, giving you peace of mind as you purchase your new vehicle.

Annual percentage rate

Known more commonly as APR, this term represents the percentage of your loan that you’ll be charged each month, multiplied by 12. This number will help you calculate what you will have paid by the time you finish paying off the loan.

Credit report

A documented record of your credit history, highlighting all credit accounts and their balances, along with information on late payments and bankruptcy. This is used to allow the lender to evaluate whether you’re suitable for a loan.

Incentive rate

A special interest rate offered to customers with excellent credit histories by manufacturers. Not all customers will qualify for incentive rates.

Monthly payment

The specific amount of money you will pay each month towards your car loan or lease.


This acronym stands for Manufacturer’s Suggested Retail Price, which is seen as a guide price for dealers. The base MSRP is a suggested retail price when there are no options added to the vehicle, which is why this number is often different than your vehicle’s price tag.

Pre-payment penalty

A fee that could be charged on some loans if you happen to pay the loan off before the end of the term.

Loan term

The length of time of the loan in months. The term could last just a couple of years or several years, depending on your needs.

Trade-in allowance

When you’re trading in your old vehicle, this is the amount of money that is taken off of your new car’s purchase price.

Contact us at Russell Honda in Sherwood, Arkansas, if you have more questions about financing the Honda model of your dreams. We’re here to simplify the purchasing process so you can bring home a new vehicle faster.


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