Terms and Definitions
- PAPER BUYER
- Individual at the lending institution who evaluates credit applications submitted by a dealer, in light of that institution's credit policies.
- PAYMENT PROTECTION PLAN
- The Credit Insurance and Extended Warranty programs designed to protect the customer's investment in the vehicle and his/her savings.
- PAY OFF
- The current indebtedness on the vehicle which the dealer is taking in trade from a potential customer, less the amount required for the lienholder to release the title to the dealer.
- PHYSICAL DAMAGE INSURANCE
- Vehicle insurance coverage required by the lienholder to provide protection against collateral loss. The customer must sign a form before leaving the dealership with his/her new purchase that physical damage coverage is in-force. (See CAR INSURANCE COVERAGE).
- PICK-UP PAYMENTS
- A method of increasing a borrower's equity by scheduling an additional payment prior to the first monthly payment coming due.
- PRE-EXISTING CONDITION
- A clause in an A&H policy which states a disability is not covered if the disability resulted from an illness or accident which occurred within six months prior to the issuance of the policy and caused a disability within six months after the effective date of coverage.
- PRINCIPAL BALANCE
- The unpaid cash balance plus insurance charges and registration fees, tax, title and licenses on a vehicle purchase.
- PRO RATA
- Method of calculating refunds on Vehicle Service Contracts and some cancelable insurance policies (for example, Accident & Health).
- RATE ADMINISTRATION
- The practice followed by the Finance Manager in establishing a range of retail customer finance rates that are consistent with sound business practices and customer good will.
- RATE DIFFERENTIAL
- The difference between the finance rate charged to a customer by the dealer and the lender's buy rate to the dealer.
- REBATE (Finance)
- Portion of the finance charge refunded to a customer when he/she prepays a loan.
- REFERRAL
- Movement of the customer from the salesperson's office to the Finance and Insurance office.
- REFINANCE
- The lienholder reorganizes the outstanding balance on an existing loan usually for the purpose of making the monthly payment more compatible with the customer's current financial situation.
- RULE OF 78
- Universally accepted method of calculating finance charge or credit insurance premium refunds to you when you pay off a finance contract before its maturity date. Most of the lender's money is outstanding at the beginning of the contract than at the end, resulting in the lender earning most of the interest early in the contract. Similarly, the credit insurer's risk is greater at the beginning and as a method is also referred to as THE SUMS OF THE DIGITS because the addition of the numbers between 1 and 12 will equal 78.
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