Understanding Dealership Jargon: Terms the Public May Not Know

The automotive industry is rife with specific terminology that can be confusing to the uninitiated. When you’re dealing with car dealerships, whether buying a new car or getting service on your existing vehicle, you might encounter several terms that aren’t immediately clear. Here’s a breakdown of some dealership jargon that the public may not understand, aiming to demystify these terms and help you navigate your next dealership visit more confidently.

F&I (Finance and Insurance)

A department within a dealership responsible for arranging financing and insurance for customers purchasing vehicles. The F&I manager will also offer additional products such as extended warranties and GAP insurance.

MSRP (Manufacturer’s Suggested Retail Price)

The price that the manufacturer recommends the dealership sell the car for. It’s often used as a starting point for negotiations.

Invoice Price

The price the dealership pays to the manufacturer for the vehicle. Knowing this price can give buyers leverage during negotiations.

Doc Fee (Documentation Fee)

A fee charged by the dealership to cover the cost of processing the paperwork involved in selling a car. Doc fees vary by state and dealership.

APR (Annual Percentage Rate)

The annual rate charged for borrowing or earned through an investment. In automotive terms, it refers to the interest rate for your car loan.

Upside Down

When you owe more on your vehicle loan than the car is currently worth. This is also known as being “underwater” on your loan.

GAP Insurance

Insurance that covers the difference between the actual cash value of a vehicle and the balance still owed on financing. GAP insurance is crucial if your down payment was low or your loan term is long.

Extended Warranty

An optional service contract that covers certain vehicle repairs or problems after the manufacturer’s warranty expires. It’s offered at an additional cost and is often negotiable.


A percentage of either the MSRP or invoice price of a new car that the manufacturer pays back to the dealership after the car is sold. It’s a way for dealerships to recoup some of their expenses and potentially lower the sale price for the buyer.

Understanding these terms can make your dealership experience less daunting and help you make more informed decisions about your vehicle purchase or service.

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