Aaron Widmar
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Your Dealership Dictionary: Making Sense of Car Sales Lingo

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Car salesperson helping someone find a car to buy on a dealership lot

Have you ever walking into a car dealership and felt like the salesperson was speaking an entirely different language? No matter how hard you listened, they kept using terms and phrases that didn’t make any sense to you.

Every industry has its own terminology, including the automotive market. Although jargon builds understanding within that niche, it can exclude people who aren’t familiar with the business, and that can be problematic when you’re trying to buy a car.

Here are some basic auto industry terms and market jargon you may hear the next time you visit a car dealership.


Study Your Vocabulary: Make sure you know these 4 terms when shopping for a used car


Learn these terms before shopping for your next car

The best place to learn the language is by studying cars themselves and spending time online visiting review websites. There you’ll learn the basics of vehicle classes, segments, and trim levels so you can find the configuration that’s right for you.

Once you narrow down your search, you’ll encounter segment-specific terms like crossover vs. SUV, light-duty vs. heavy-duty trucks, and less common transmission types like dual-clutch and continuously variable. Many new cars come with driver assistance features, which are intuitive safety functions to improve your awareness and reaction time on the road.

The terms “all-new,” “redesigned,” and “refreshed” are usually used interchangeably. Because there are no federally or industry-regulated guidelines for using these labels, their specific meaning can vary among dealerships and brands based on their marketing. Typically, all of these terms refer to major appearance or structural changes that have been made to a model for the current model year.

If you’re going green, make sure you understand the differences between a plug-in hybrid electric vehicle (PHEV) and an electric vehicle (EV). Typically, the latter term refers to an electric vehicle that will drive purely on electricity without the use of gasoline. PHEVs can do this for a limited time but have a gasoline engine supporting the electric motor once it runs out of juice. In both cases, you’ll need to recharge the battery to use electric power again.

car salesperson in a business suit holding paperwork

When you’re looking at cars on a dealership lot, make sure the ones you inspect have a Monroney sticker on them. These paper window stickers have basic information, such as the manufacturer’s suggested retail price (MSRP), EPA-verified fuel economy ratings, and included features. You can use the MSRP as a starting point for negotiations for a new car purchase or look up its Blue Book value (which aggregates the average selling/buying value of that model based on market sales data) if you’re buying a used car.

Sometimes an Additional Dealer Markup (ADM) label is by the Monroney sticker, which appears when a model is in high demand and the dealer raises its price. Dealers purchase vehicles from manufacturers at dealer cost and then sell them for more money, which is how dealerships make money and stay in business. Luckily, they may offer some current dealer incentives or factory-incentive rebates to save you money if you qualify.

Buying a car involves paying a lot of fees that aren’t explained unless you ask. Documentation fees are charged by the dealer to fund paperwork and processing for your purchase and are non-negotiable. The destination fee is also set in stone; this is the fee that the manufacturer charges the dealership to have vehicles shipped to its location, which is then passed onto you as the customer. Dealer prep and advertising fees are based on pre-sale service and publicity fees, and can often be adjusted if you negotiate with the dealer.

Once you’ve decided on the final price after negotiations, prepare to talk about financing and insurance (F&I) and annual percentage rates (APR) — the interest rate on your loan. You’ll also need to decide if you need gap insurance and an extended warranty. Once you pay off the loan, you’ll receive the title (pink slip) that gives you full ownership of the vehicle. Until then, the DMV holds it for the dealership.

If you choose to lease your new car instead of buying it, you’ll pay to borrow it for a set period of time before either returning it or paying a buyout price to own it at the conclusion of your closed-end lease.

This is just a quick overview of the many words you’ll hear used by car salespeople when you’re shopping for a new or used car. Make sure you do your research to know what all of these phrases mean so you’re ready to talk the talk.