#1
What is the APR in car financing?
Annual Percentage Rate
ExplanationAPR represents the yearly cost of borrowing, including interest and fees.
#2
What does the term 'down payment' refer to in car financing?
The initial lump sum payment made at the time of purchase
ExplanationDown payment is the initial payment made to reduce the loan amount.
#3
What factor does not directly affect the interest rate offered on a car loan?
Color of the car
ExplanationCar color does not influence the interest rate on a loan.
#4
How is the monthly payment on a car loan calculated?
Using the interest rate, loan amount, and loan term in a loan amortization formula
ExplanationMonthly payments are determined by the loan amount, interest rate, and loan term.
#5
What impact does a longer loan term have on monthly payments and total interest paid?
Lower monthly payments and higher total interest
ExplanationLonger loan terms decrease monthly payments but increase total interest.
#6
Which of the following best describes 'pre-approval' for a car loan?
A process where the lender checks your credit to offer a specific loan amount and rate before you shop for a car
ExplanationPre-approval assesses credit for a specific loan amount and rate beforehand.
#7
How can the total cost of a car loan be calculated?
By adding the total interest paid over the loan term to the loan amount and the down payment
ExplanationTotal cost includes loan amount, down payment, and total interest.
#8
What is 'negative equity' in car financing?
When the car's market value is less than the remaining loan balance
ExplanationNegative equity occurs when the car value is lower than the loan balance.
#9
How does refinancing a car loan affect the overall cost of the loan?
It reduces the overall cost if the new loan has a lower interest rate
ExplanationRefinancing lowers overall cost with a new, lower interest rate.