AUTOMOTIVE TERMS YOU NEED TO KNOW TO DEVELOP FOR DEALERS

A

Acquisition fee

Also known as a "bank fee," an "administrative fee" or an "assignment fee." For a vehicle lease, a fee charged by the leasing company at the inception of the lease that is intended to cover a variety of administrative costs, such as obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease into its data and accounting systems.

Accident & Health

Also called "A&H", term insurance coverage which pays the monthly payments in the even the injured becomes disabled through a converted illness or injury and is unable to work. To be covered the period of disability must exceed the number of days specified by the policy-usually 7 or 14 days.

Actual Cash Value

Also called "ACV", this is the actual wholesale value of a trade in vehicle.

Actual Percentage Rate

Also called "APR", the finance charge over a full year, expressed as a percentage, reflecting all costs of the loan as required by the Truth in Lending Act.

Add-On Rate

The relative cost of credit, expressed as a percentage, which is based on an amount per one hundred dollars..

After-Market

This is a term for parts and accessories, which are not from the original manufacturer.

Alignment Rack

Special hoist and machine combination used to straighten the direction both vertically and horizontally of the front and rear wheels.

Appraisal

The act of evaluating and assigning a monitary value a dealership is willing to pay for a vehicle, often a vehicle being traded-in during the sales process.

Asking price

The price for a vehicle asked (before any negotiations) by the dealer or other seller.

Automatic transmission

A transmission that uses a torque converter, planetary gearset and clutches or bands to automatically change a vehicles gears.

Available Hours

Total number of hours a Technician is present and available for work.

B

Back Counter

This is the Technician’s counter in the parts department.

Back Counter Person

This person sells parts to the service department by coordinating parts needs with Technicians.

Back End Profit

Profit on a car deal derived from F&I income, credit life income, A&H income, reserve income and extended warranty income.

Backorder

This term is used for the process by which a parts department is willing to accept an order for unavailable parts with the intention of fulfilling it when the parts become available.

Balance Sheet

This is a report of the assets, liabilities, and net worth of a dealership. On a manual system it is usually prepared at the end month end, although key items may be included in the DOC report. On the automated system, a perpetual report is kept.

Base Price

The MSRP of a vehicle before options, destination fee, any dealer advertising fee and other costs.

Bayer's Guide

The sticker contains the description of the vehicle's warranty as required by the FTC, required on all vehicle for sale by a dealership

Best Reorder Point

This is the point in which a stock order must be placed with a depot or supplier, and it is based on the relation of quantity of stock on hand.

Business Manager

Assists the General Manager in controlling cash protects all dealerships assets, determines the appropriate inventory levels to allow, and prepares the financial statements. They are also responsible for internal controls and provide management information to the decision maker.

Buy Rate

The interest rate, expressed as a percentage, at which the lending institution will buy the contract from the dealer.

Buyer's Order

A summary of what both parties have agreed to including buyers information, vehicle information and terms of sale. This document is converted to a formal purchase agreement.

C

Cap Reduction

Capital reduction. In a vehicle lease, any trade-in amount, cash down payment or rebate amount that reduces the cost of the vehicle being leased (its "capitalized cost").

Carryover

A carryover is a job that is not completed in one day.

Certified Pre-Owned Vehicle

A used vehicle offered for sale by a franchised dealer for that vehicle make and who follows the manufacturers requirements for "certifying" the vehicle (including inspection and service) and which, upon sale, is accompanied by a manufacturer-backed warranty.

Charge Back

The dealer’s portion of rebated interest, life insurance, and A&H insurance and other contract related charges as a result of early loan pay off by a consumer. Calculated using the “Rules of 7’s” formula.

Clean Sale

No trade-in vehicle involved in the sale of a new vehicle.

Close

Act of completing a sale. The deal is signed, paid for, and the consumer has the keys to the vehicle.

Closed-End Lease

A closed-end type of lease is an agreement in which the lesser assumes financial responsibility for the difference between depreciated value and actual cash value of the vehicle at lease end. This involves a fixed term.

Closer

The Closer is responsible for obtaining more profit on the sale or assisting in closing a tough sale. Many times the closer works with the Sales Associate.

Co-Signer

A co-signer is someone who signs a loan for additional security.

Commissions Voucher

Also called a "Commission Slip" A document for a vehicle sale provided to the selling sales person(s) showing all the Associate’s commission and sales. The Commission Voucher is the original record used for payroll, Associate acknowledgement, and sales history.

Core

Relates to a portion of the part that can be remanufactured. There is usually a deposit on this portion when a new part is ordered.

Credit Application

This document outlines a consumer’s financial history used to obtain credit of a vehicle purchase.

Credit Life Insurance

Also called "CL", this is term insurance coverage that pays off the amount owing on a contract in the event of the death of the borrower (Single Credit Life) or the death of a borrower or spouse (Joint Credit Life).

D

Days’ Supply

Number of days a Parts Manager can continue to operate at a given level of service if there is without a supply of parts on hand.

Deal

This is the term for the transaction of buying a vehicle at the dealership.

Deal Folder

Also called "Deal Jacket", once the buyer’s order is signed, a deal is created. All above sales forms are filed within this folder. Copies of additional documents required for the transactions can also be filed in this folder until the vehicle is delivered. These forms are: trade in papers, registration forms etc.

Deal Jacket

This folder contains all of the documents relating to the purchase and sale of a vehicle. Sometimes called a “car jacket" or "vehicle jacket".

Deal Recap

F&I or Business Manager's earned commissions, gross profit, net profit, etc on each deal. This is usually printed and inserted into the deal jacket.

Deal Worksheet

The vehicle sales process begins with completling a deal worksheet. This form is used by the Associate to work a deal prior to presenting it to the Sales Manager. This form at minimum contains the agreed upon price for the new car, any additional options and the trade in allowance.

Dealer Cash Incentives

Amounts that are paid to dealers by manufacturers to stimulate vehicle sales by incentivizing the dealers to lower their prices to consumers, typically paid or earned upon the dealers purchase of the vehicle from the manufacturer, upon the dealers sale of the vehicle, or when the dealer achieve specified sales volume targets.

Dealer Holdback

A percentage of either the MSRP or invoice price of a new vehicle (depending on the manufacturer) that is repaid to the dealer by the manufacturer after the vehicle is sold. For/p>

Dealer Trade

The process of trading one vehicle for another in order to get a vehicle for their customer that's on another dealer’s lot.

Delivory Coordinator

Ensure and coordinate with Service department for the preparation of all sold vehicles prior to customer arrival, demonstrations vehicles functions t time of delivery. Coordinator will often set up first service appointment and survey customers after delivery.

Demo

A demonstrator car (or demo) is a new car that has been driven by the dealership's salesmen, managers or executives but has never been registered with the state.

Desking a Deal

During a vehicle sale, this is the process of presenting options to a customer in order to come to an agreement on the selling price, monthly payment, and financing terms for the car purchase.

Detail Manager

Responsible for all labor related to the detail work on new vehicles.

Dispatcher

The Dispatcher maximizes workshop utilization, monitors timely completion of work in progress, and assigns work to the Technicians in accordance to their ability.

Displacement

The volume of an engine’s cylinders and the total air displaced by the pistons inside those cylinders. Example: A “2.8 liter engine” displaces 2.8 cubic liters of air in one complete combustion cycle.

Documentary Fee

Also called "Doc Fee", this is a nominal surcharge to cover the administrative costs to file the vehicle registration.

Down Payment

A cash payment credited against the purchase price of a vehicle, which reduces the amount to be financed. In a lease transaction, this amount is often referred to as the "capital reduction."

Drivetrain

The system of components that generates power and transmits it to a vehicles wheels commonly called a transmission.

E

E85

A fuel consisting of gasoline or another hydrocarbon mixed with up to 85% denatured ethanol.

Economic Order Quantity

Economic Order Quantity is a formula that determines the most effective stocking level. This formula is based on sales history pattern and is a projected/forecasted sales pattern.

Emergency Purchase

Any part bought from anyone at anytime in any quantity where parts or all profit anticipated on the sales is lost because of indirect, non-recoverable expenses.

Excess Stock

This is a condition where the number of parts currently on the shelf of a parts department, is in excess of the required days supply set by the Parts Department.

Extended Warranty

This is a warranty that is offered by the manufacturer to extend the term of the standard new car warranty.

F

F&I Manager

Vehicle Listing Page - A list of vehicles on web site - see also "VLP" or "SRP"

Finance Reserve

A commission earned by a dealer for handling the financing arrangements on behalf of the lender. For example, a finance deal might be written with the customer paying 12% interest for the vehicle. The bank might only charge 10.5% interest for this paper. The 1.5% difference is paid to the dealership on a quarterly basis.

Financial Statement

This is a financial report usually consisting of a balance sheet, income statement, departmental profit and loss, and departmental sales and gross profit analysis. Usually prepared by the Office Manager or the Business Manager.

Fixed Operations

The parts, service and body shop departments typically are at the “back end” of the dealership building.

Flag time

The time card that is used to record flat rate hours and actual time worked on repair orders.

Fleet Manager

They are responsible for contacts and sales to fleet customers, commercial customers; handle all related in-house calculations.

Flex Fuel Vehicle

A vehicle than can run on at least two different fuel sources either simultaneously through a single fuel system or separately through multiple fuel systems.

Floorplan

This refers to money borrowed by the dealership to finance vehicle inventory.

Front Counter Person

This person sells parts directly to retail customers by determining which parts are needed for a consumer’s repair needs.

Front End Profit

Profit made from a vehicle sale, not including finance revenue.

Fuel economy

A measure of the amount of fuel used by a vehicle over a certain distance, or the distance traveled per volume of fuel used.

G

Gap Insurance

In a vehicle lease, insurance that covers any "gap" between (I) the amount the lessees insurance company will pay to the lessee if the leased vehicle is stolen or destroyed, and (ii) the aggregate remaining amount the lessee owes at that time to the leasing company.

Gas Guzzler Tax

A graduated federal tax levied at the time of initial new-vehicle purchase on vehicles with especially poor fuel economy.

Gas Slip

If the dealership puts gas into the vehicle, the gas slip is generated. The cost of the gas is added to the cost of the vehicle.

General Ledger

This term is used to encompass the financial activity of an establishment, often called a "GL". In a manual environment this is updated at month end. On an automated environment, this is a perpetual record.

General Manager

The GM acts on the behalf of the Dealer Principal to operate the business. Directly supervises all Managers.

General Sales Manager

Also called a "GSM", coordinates department activities, Customer/Manufacturer related sales activates, advertising, personnel and vehicle inventory management for the entire department, and supports all department Managers.

Grey Market

This is the term used when illegal business of supply counterfeits auto parts or the illegal business of importing a car to the USA when the car was not designed to meet USA emission and safety standards.

Gross Profit

This is the calculation of sale less cost of sale. This cost of sales does not include selling expenses, or any share of fixed expenses required to keep the building heated, lighted etc. It is the difference between the sale amount and the cost of the item.

Gross Vehicle Weight

Also referred to as "GVWR." The sum of a vehicles curb weight, cargo weight capacity and passenger weight capacity.

Gypsy Part

This is a simulated or looks alike non-manufacturer part. It is usually less expensive and does not carry a factory warranty. It is supplied by the aftermarket or jobbers.

H

Heavy Line

Designation for a technician whose primary skills involve major repair or rebuilding of large components (engines, transmissions etc.)

Highball

This is a sales technique also know as bait and switch. Begin with a high price for a trade in and switch to a lower price.

House Deal

A type of car sale is made by the dealership’s management. In a house deal, the dealer pays no commission to a salesperson.

Hybrid Vehicle

A vehicle that combines the use of internal combustion and electricity as power sources.

I

Incentive

Any kind of financial assistance from a vehicle manufacturer that, by reducing either the net price or the cost of financing/leasing, motivates customers to buy/lease a new vehicle.

Income Statement

This is an accounting report showing total income and expenses. The departmental profit and loss statement contains the by department breakdown of these totals.

Initial Cap Cost

The negotiated selling price for a lease deal, not necessarily the same as the MSRP .

Invoice

Also referred to as "Invoice Price." The price that appears on the invoice that the manufacturer sends to the dealer when the dealer receives a vehicle from the factory.

J

Jobber

This is an auto parts store, generally selling very active, fast moving, or specialty items only, who is in direct competition with the prime manufacturer.

Journal

This is a diary of accounting transactions entered from the dealerships source documents (invoices, checks etc). Dealerships generally have several, each to a store particular type of transaction. For example, cash receipts, cash disbursements, new vehicle sales, used vehicle sales, parts sales and service sales. Journals are summarized in general ledgers.

K

Key Tag

A numbered tag used to cross-reference the vehicle and its keys.

L

Labor Time Guide

Documents published by the manufacturer of the vehicle that define operation codes and flat rate time associated with a particular job.

Lead

information about a person who may be interested in buying a vehicle or having service work performed.

Lease End Value

Also called "LEV" or "Residual Value", a vehicle leasing company's assumption of what a vehicle will be worth at the end of the lease, which is a factor used to determine the monthly lease payment.

Lease Manager

In charge of completing paperwork to process the return of a vehicle to the lender from a lessee at lease end. Manager offer contact customers in advance of the lease end in an effort to retain the customer for future lease opportunities.

Lemon

A vehicle that is found to have numerous or severe defects not readily apparent before its purchase. Used both informally to mean a vehicle that proves to be defective, imperfect or unsatisfactory, and with more precise meaning in various states "lemon laws" that provide vehicle purchasers certain rights.

Lessee

The person or entity that leases a vehicle from a lessor.

Lessor

The entity that owns the vehicle being leased to the lessee. Although most leases are arranged by a dealership, in almost all cases the lessor is either a financial institution or a division of the vehicle manufacturer.

Light Line

The light line is designation for the Technician who primarily does maintenance and small component replacements (i.e: tune-ups, starter replacements, etc).

Loaner

A vehicle used as alternate transpiration, usually in the service department. These are often new vehicles that are reimbursed by the manufacturer for their depreciation while in service.

Low Ball

Quotation of high allowance or low net price to test the consumer reaction and find a more favorable middle area between what the consumer expect and what the Sales Associate can grant.

M

Make

For a vehicle, either the name of its manufacture or manufacturer's division (Chevrolet is a make and a division of General Motors)

Manual Transmission

A transmission that uses a clutch and a shift (gear) selector to change gears.

Mechanical Breakdown Insurance

Also called "MBI", insurance coverage that is limited by term and mileage that pays repair and related costs incurred by mechanical breakdown of the insured vehicle.

Model

A specific vehicle brand identified by a name or number and which is usually further classified by trim or style level. (Chevrolet Camaro RS, Camaro is the Model name and RS is one of several trim levels available for the Camaro model).

Model Year

For a vehicle model, the calendar year designation assigned by the manufacturer to the annual version of that model. (exmple a 2020 Chevrolet Camaro RS was prodiced in the year 2020)

Money Factor

Also referred to as a "lease factor" or "lease fee." An auto leasing industry term for expressing the interest rate used to calculate the monthly lease payment.

Month End

Monthly Payment

The amount of principal and interest that must be paid each month under the terms of a finance or lease contract.

Moroney Sticker

Also called "Window Sticker", the sticker contains the description of the vehicle, equipment, options, and the manufacturer’s suggested retail price. This refers to the Monroney Price Label Act of 1958, which required the manufacturer to adhere a sticker in the vehicle listing, price, and options etc to the vehicle prior to leaving the plant.

N

Net Worth

This is the total liability subtracted from total assets. This should be a positive number and represents the original investment, prior year’s earnings, and current year’s profits.

New Vehicle Clerk

This position handles all the paperwork and posting related to the sale of new vehicles.

New Vehicle Manager

Also called "New Car Manager", coordinates department activities, customer/manufacturer related sales activities, advertising, personnel and vehicle inventory management for new vehicle portion of the dealership. They are often responsible for approving the terns of a sale on behalf of the dealership.

O

Obsolescence

Obsolescence is generally defined as when a part has no sales posted in a twelve-month period. The condition of a part when it does not produce a profit upon the sale of that part. Also, the condition of a part when it is no longer needed or cannot be used for a given application.

Odometer Statement

Federal law for all vehicle transactions now requires these forms. This form is also used to record miles at the end of a vehicle's lease when returned to the lender.

Office Manager

This position runs the office and coordinates all office work. They all are known as the bookkeeper.

On Hand

On Hand refers to the actual quantity of a particular part that is in inventory.

Open-End Lease

A lease in which the lessee assumes financial responsibility for the difference between the depreciated value and the proceeds of the vehicle sale at lease end.

Over Allowance

This is the difference between the trade allowance and the actual cash value.

P

Pack

This is also referred to as ‘additional dealer markup’ or ‘additional dealer profit’. An arbitrary amount added to the MSRP of a vehicle for the purpose of making more profit on the sale of a vehicle or to provide additional margin for the trade allowance or discount.

Paper

This is the financial industries term for a loan agreement.

Pats Manager

This person manages and operates the department at a profit by selling parts and controlling inventory.

Pats Runner

This person performs errands for the department. This includes picking up and delivering parts.

Payload

A vehicle's carrying capacity (in pounds) of occupants and cargo, and equal to the vehicle's Gross Vehicle Weight Rating (GVWR) minus its curb weight.

Payoff

Also called the "buyout amount." The amount that, at any specified time during the term of a vehicle lease or loan, is required to be paid in order to discharge the remaining obligation.

Payroll Clerk

This position processes all paperwork and posting regarding employee wages.

Penetration

This is the relation of new car sales to average price-class potential in any stated market.

Posting Clerk

This person handles all the postings of parts transactions.

Profit

This the amount of money left over after all expenses have been met including any and all taxes.

Profit and Loss Statement

Prospect

A customer who expressed interest in buying or servicing a vehicle within a defined time frame

Purchase Order

R

Ready Cost

This is the manufacturer’s invoice amount plus internal charges for retail preparation, undercoating, waxing, gas, local taxes and any other extra service or equipment; sometimes used as a basis for Sales Associates commission instead of invoice costs.

Rebate

A cash payment offered as an incentive by the manufacturer to consumers, which is usually applied by the consumer to reduce the net price of a vehicle.

Recall

A recall is a notice sent by a vehicle manufacturer to owners of a vehicle advising them that the vehicle has or may have a serious defect that may compromise the safety of the vehicle.

Reconditioning Manager

Also called "Recon Manager", responsible for all labor related to the detail work on used vehicles.

Residual Value

A vehicle leasing company's assumption of what a vehicle will be worth at the end of the lease, which is a factor used to determine the monthly lease payment.

Retained Earnings

This is the amount of the prior year’s profits retained by a corporation.

Rollback

Recalculation of the contract to provide a specific desired monthly payment by adjusting elements such as: cash price, trade allowance, cash down, interest rate, term, or cost of MBI.

S

Salesperson

Responsible for contacting potential customers and getting a commitment to purchase a vehicle.

Security Deposit

A payment required at the inception of a vehicle lease to provide collateral to the leasing company for the lessees promise to comply with the terms of the lease.

Service Administrator

The Service Administrator supervises all customer related activities; warranty administration and factory recall campaigns.

Service Advisor

Acts as a liaison between service customers and the dealership. They also promote the sale of labor and parts.

Service Drive

This is the area in the dealership where a service advisor meets with a customer to discuss what vehicle repairs are needed.

Service Manager

Manages and operates the service department as a profit center while maintaining customer satisfaction at all times.

Shipping/Receiving Clerk

This person coordinates incoming and outgoing shipments for the department. This person is also responsible for receiving parts into the inventory.

Shop Charges

Shop charges are the amount charged on repairs to cover administrative costs of the service department. For example, shop charges cover the cost of Tech uniforms, laundering of rags, etc.

Single-limit Insurance

An automotive insurance policy with a single combined dollar limit of coverage for property damage, liability coverage and bodily injury coverage. Compare "split-limit insurance."

Spiff

A cash incentive, contest entry or prize given by a dealership to salespersons as motivation to sell vehicles.

Plit

When two salespeople end up helping the same customer buy a vehicle, sharing the commissions and credit for the sale.

Spot Delivery

An expedited sales process where the sale is agreed to and delivery of a vehicle commences immediately after (taking delivery “on the spot”).

Sticker Price

The Manufacture's Suggested retail Price displayed on the vehicles original window sticker.

Subprime

Also called "Special Credit", a loan made to a borrower with a low credit rating that typically bears interest at a higher rate to compensate the lender for the greater risk.

System Administrator

The System Administrator is responsible for all the computer systems in the dealership.

T

Technician

Performs vehicle maintenance and repair work in accordance with dealer and factory quality standards.

Test Technician

The Test Technician assists Service Advisors in vehicle diagnosis, verifies quality and completion of work performed and determines and records additional repair requirements.

Title Application

A request for a vehicle title to be issued by the state's motor vehicle division in which the vehicle’s owner resides. This form is filled out by dealership and signed by the customer at time of delivery and submitted on behalf of the customer to the proper state authority.

Title Clerk

This position is responsible for posting and receiving all paperwork related to vehicle titles to the proper state agencies and sending titles to the vehicle owner or lender.

Torque

Torque is part of the basic specification of an engine: the power output of an engine is expressed as its torque multiplied by its rotational speed of the axis, usually express it foot lbs.

Traction Control System

Traction Control System, or "TCS." A safety feature that regulates wheel spin and prevents loss of control under acceleration by ensuring maximum traction and contact between the tires and the road

Trade-in

A vehicle that is currently owned by the purchaser of a new or used vehicle from a dealer and that is exchanged for the newly purchased vehicle in order to reduce its net price.

Turn/Gross

Turn/Gross refers to the ratio of the total cost of sales during the year to the dollar value of the inventory.

Turn/True

Turn/True refers to the portion of the gross turn which is attributable to sales from the dealership’s own inventory, yielding the highest potential of gross and net profit.

Turnover

Also called a "TO" or "Turn", technique practiced when a Sales Associate who cannot close an order introduces his prospect to another Sales Associate or manager for further combined effort to do so. Sometimes referred to as a “one-two”.

U

Up

An “up” is a consumer. They are assigned to Sales Associates covering the floor in a certain order.

Upside-down

Also called "Negative Equity", when the amount owned on a vehicle is greater than the vehicle’s actual cash value (ACV).

Used Vehicle Clerk

This position processes all the paperwork and posting related to the sale of a Used Vehicle.

Used Vehicle Manager

Also called "Used Car Manager", coordinates department activities, customer/manufacturer related sales activities, advertising, personnel and vehicle inventory management for the used vehicle portion of the department.

V

Variable Operations

The new and used vehicle sales, finance and insurance, leasing and rental departments all are part of the “front end” or variable operations portion of a dealership.

Vehicle Type

The type of vehicle class, examples of which are large cars, midsize cars, minivans, pickup trucks, small cars, special purpose vehicles, sports utility vehicles, station wagons and vans.

Vehicle Washout

This is a record of all activity generated from the initial sale of a new or used vehicle. A vehicle is said to be washed out when the original and any subsequent trade ins have been sold. Used as a comparison tool in analyzing gross profit generated per vehicle sold.

W

Warranty Clerk

Wheel Track

The distance measured across an axle from the centre line of one tyre tread to the centre line of the opposite tyre tread.

Wheelbase

Wholesale Parts Salesperson

This person contacts parts buyers and gets commitment to have outside organizations to purchase items from the dealerships inventory.

Wholesale Value

The price at which dealers purchase vehicles from other dealers or from lenders, usually at auction.

Work Order

This is a hard copy document containing the customer complaints, estimates and authorization signature.