Auto Loans

The Blue Book, or Kelley Blue Book, is a guidebook that quotes prices for new and used vehicles of various makes and models. The first Blue Book was published in 1926 by Los Angeles car dealer Les Kelley as a resource for professionals in the car industry. It now includes consumer and online editions that outline fair purchase prices based on what others in a prospective buyer’s area have paid for similar cars.

A subprime auto loan is a loan offered to borrowers with low credit scores or limited credit history. While there’s no universal definition of “bad credit” that excludes a borrower from prime loans, subprime loans are generally offered to borrowers with FICO scores between 650 and 450. Terms on subprime loans are less favorable than those offered to borrowers with better credit. Interest rates are higher and lenders will often charge prepayment penalties if the borrower decides to pay off their loan early.

A lease balance is the amount of money a lessee has left to pay under the terms of a lease agreement. The lease balance comes into play when either a lessee chooses to terminate the lease early or the leased car is stolen or totaled. In each case, the lessee is expected to pay back the full lease balance. Since cars depreciate quickly, a lease balance can exceed the vehicle’s fair market value, which is all insurance will cover when a car is totaled. Lessees can pay for gap insurance to make up the difference in such an event.

Loans are indirect when the lender does not have a direct relationship with the borrower. This can mean the loan was made with the help of a beneficiary, like a car dealership in the case of auto loans, or the borrower’s debt was purchased on the secondary market. Indirect loans facilitated by an intermediary are often easier to get than direct loans, but they are also more expensive.

A subvented lease is a lease to which a car maker or dealer has applied a subsidy in order to make the vehicle more attractive to renters. Lessees offer subvented leases to attract new customers or move vehicles that are in low demand. Lessees may subsidize a lease with an upfront rebate or by increasing the car’s residual value (i.e., its projected retail value at the end of the lease), thereby reducing monthly payments.