What does this car-buying term actually mean?

Last Updated: Aug 08, 2014 04:41PM EDT

What is a security deposit?

A security deposit is a standard part of many leases. The dealer holds on to the deposit in case of any damage or extra wear and tear on a vehicle. Typically, the amount of the security deposit is equal to your monthly payment.

The security deposit is fully refundable at the end of your term as long as the car is returned in the condition that was agreed upon at the time of purchase.

Otherwise, if there is any damage to the car, this will be taken out of the security deposit and the remainder will be refunded back to you.

What are "mandatory fees"?

Mandatory fees are the fees associated with purchasing a vehicle which are non-negotiable.  They are fees the dealer must pay when a vehicle is sold, and they make no profit on them.  They often consist of freight/PDI, an air conditioning tax, a provincial tire levy, and sometimes a provincial regulatory levy. Depending on make, some luxury brands may also institute administration fees that dealers will charge.


What are "Incentives"?

When manufacturers want to encourage the sale of certain models, they may provide special programs to further decrease the cost of a vehicle to the buyer. These can come in the form of cash rebates, or discounted interest rates. All customers are entitled to these incentives as long as they meet the requirements (for example, a cash rebate is offered only when a vehicle is purchased in cash).
If a dealer has only offered you a discount in the form of a manufacturer rebate, they have not actually offered you any special deal.  There is still room to haggle! Consider our free cost report or our premium service to get more competitive offers on your vehicle.

What is dealer holdback?

Dealer holdback is a type of financial assistance manufacturers sometimes provide to dealers. It is generally a percentage of the manufacturer’s suggested retail price (MSRP) or a fixed dollar amount intended to offset some dealer overhead costs (e.g. inventory, financing, marketing, etc.).
Using dealer holdback as a negotiating tool would require an in-depth understanding of a dealer’s entire net costs – something difficult even for industry insiders.  Consumers should not expect to be able to receive any portion of holdback when negotiating a potential discount with the dealer.

Unhaggle provides invoice price and average price paid in your local area through our free cost report, which represents more concrete and useful information to help you with your negotiation.

What is an administration fee? Do I have to pay it?

An administration fee is a fee applied by the dealership in addition to the price of the vehicle. With the exception of luxury brands, the decision to charge this fee is made by each individual dealer. When a customer reviews their offers on Unhaggle, the pricing will include all fees and taxes (including any administration fee).

What is a lease?

Simply put, leasing a vehicle involves paying a monthly fee in exchange for use of the vehicle over a period of time.  A customer who leases a vehicle is responsible for the upkeep and maintenance.  After the term is over, the customer will return the vehicle to their dealership.
Leasing tends to offer the lowest monthly payments for any given vehicle, and lets a customer continually drive new models every few years.  However, after the term is over, the customer does not own the vehicle.  There is sometimes an option to purchase the vehicle after leasing it.

What is financing?

Financing is a common way to purchase a vehicle.  It usually involves a down payment, followed by monthly payments to the dealer.  A portion of the payment goes towards paying off the rest of the vehicle, while the rest is interest.  At lower interest rates, more money goes towards paying off the vehicle.  With a 0% financing rate, the entire monthly payment goes towards paying off the vehicle. At the end of the term, a customer owns the vehicle. 
Financing is a popular option which gives a customer the opportunity to drive a vehicle which they cannot purchase outright. Financing incentives tend to carry much lower interest rates than other types of debt, such as credit cards, lines of credits, and loans.

What is a cash purchase?

A cash purchase is ideal for customers who have the required capital to purchase a vehicle outright.  It is the “cheapest” option when buying a car, as a customer ends up paying nothing towards interest.  Also, manufacturers frequently offer incentives for customers paying in cash.  
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