Shopping for your next car is an exciting time. If all goes well you will drive away in a vehicle that serves all of your needs, fits your budget, and makes you happy to drive! At Easterns Automotive, we also know that the car buying process can be a bit nerve-wracking. You might be worried about finding a used car that meets ALL of your needs, as well as your wants. But you also may be a little overwhelmed when it comes to the financing process. Of course, our professional finance team at Easterns is here to help! We will walk you through getting a car loan, step-by-step. We welcome your questions and concerns, and will be pleased to offer you any information you need. But before you start your process of getting a loan, you may want to get an understanding of the basic lingo that you might hear. It is truly important to know exactly what you are signing for when you sign on that dotted line. So, read on for a quick overview of some terms to learn, or watch our video below:
LTV: This stands for loan-to-value ratio. In other words, if you have an $18,000 loan on a $20,000 car, that’s a 90% LTV. To refer to your position in an existing car loan, you might hear the terms upside-down, underwater or negative equity. All of these terms simply mean that you owe more money on a vehicle than it is currently worth. This situation could increase the LTV of a new loan if you roll over the equity.
PTI: PTI stands for payment-to-income, which is the amount of your car payment divided into your pre-tax income. In general, this number should be around 15%.
DTI: This term stands for debt-to-income, which is all of your monthly debt divided by income. This could include credit card payments or mortgage payments. In general, this number shouldn’t be higher than 50%.
POI: POI stands for proof-of-income, and POR stands for proof of residency.
In this video, Joel Bassam, the Director of Marketing for Easterns Automotive Group, breaks down some of the car lingo you might hear during the process of buying your car.