Auto Loan Terms

Auto Loan Terms

Buying a new car can be exciting - but it doesn't come without confusion. Here are some auto loan terms you'll want to know if you're car-shopping.


A cosigner is somebody who signs your loan alongside you. This often happens when you cannot obtain a loan on your own (either due to credit or income). The cosigner accepts responsibility of the loan payments in the case that the signer cannot make them.

Credit Score/Credit History

Your credit score and credit history are something that need to be examined when applying for a car loan. Your credit score reflects how well you use available credit and if you pay bills on time. Lenders examine your credit history by looking at past loans and credit cards.

Down Payment

The down payment is the amount of money that you put towards the car that you're purchasing. Down payments can range anywhere from 0% - 30% of the car's value. Keep in mind, the higher your down payment, the lower your monthly loan payments are, and vice versa.

Interest/Interest Rate

Interest is a necessary part of your car loan. When you borrow a certain amount of money, you agree that you will give your lender an extra percentage on top of the money you borrow, essentially because you aren't paying it back to them immediately.


The "term" refers to the length of time you take to pay off a loan. Short-term loans typically refer to a loan period that is less than 48 months whereas long-term loans generally refer to loans that take 72 - 84 months to pay off.


This is a term that refers to owing more money on your car than it is actually worth. This happens most often in long-term loans when your interest accrues.

If you have any more questions or any auto loan vocabulary you're unsure about, we're always here to help at Subaru of Naples.