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 The Car Dealer makes leasing easy. In fact, we've been leading the industry in this area in convenient, easy-to-understand leases that keep customers coming back, year after year, lease term after lease term. Leasing can be a minefield, however, and its important to know what you're doing. So trust The Car Dealer's leasing specialist to help you along the way. Call our Leasing Department at (212) 555-4333 for more information and a copy of our free booklet, "Leasing Made Simple." Leasing Terms Made Easy Know the lingo before you lease! This short dictionary is meant to give you a working knowledge of basic terms used in car leasing. These terms can be used differently in different situations, and their precise definitions can be interpreted differently in state and federal laws. Lessee The customer who leases the vehicle. Lessor The financial institution that owns the vehicle. Lease Term The period of time for which a lease agreement is written. Most are 24 to 48 months long. Single Payment Lease Requires a single payment made in advance rather than periodic ones made over time - often less than the total amount you would pay making multiple payments. Closed-End Lease Also called a walk-away lease -- where you aren't responsible for the difference if the real value of the vehicle at the end of the lease term is less than its residual value. Open End Lease This holds you responsible for the difference between residual value and market value at the end of a lease. If the car is worth less than the lease's residual value, you must pay the difference. It also gives the lessee the option of buying the vehicle at lease's end. In this kind of lease, the residual value is considered unreasonable if it exceeds the real value by more than three times the base monthly payment (sometimes called the "three-payment rule"). Full Maintenance Lease Where the lessor takes responsibility for all manufacturer-recommended maintenance and service. The cost of this service is usually included in the capitalized cost or is added to the base monthly payment. Acquisition Fee The charge either paid up front or is included in the gross capitalized cost. Also called bank fee or assignment fee. It covers the lessor's administrative costs, like getting a credit report, verifying your insurance and checking documentation. Dealer Preparation Fee Some dealers charge this to cover expenses of getting a vehicle prepared for lease. Dealers may also get reimbursed by the manufacturer for this. Disposition Fee or Disposal Fee These are fees that the lessee has to pay to prepare the vehicle for resale, such as cleaning, repairs and maintenance. APR Annualized percentage rate. The annualized cost of credit, which is figured as a percentage in any financing agreement. In a lease, there is no APR or equivalent rate. Amortized Amounts Taxes, fees, charges for service contracts, payments for insurance, and any balance from a credit or lease, that's included in the gross capitalized cost, and paid as part of the base monthly payment. Base Monthly Payment Covers depreciation, rent charges, and any "amortized" amounts. Calculated by adding the amount of depreciation, rent charges, and other amortized amounts, and then divided the total by the number of years in a lease. Capitalized Cost The negotiated selling price of the vehicle. This has to be disclosed under federal law. Some states require that the term "capitalized cost" be used in leases. Capitalized Cost Reduction This is the down payment, which can either be cash or a trade-in or rebate. The amount is applied to the capitalized cost to reduce monthly payments. Early Termination/Early Termination Penalty Ending a lease before the scheduled date, whether voluntary or totaled, stolen, or defaulted on payments. Usually you pay a charge, and it is calculated as described in the original agreement. The earlier the termination, the bigger the charge - usually the difference between the early termination payoff and the amount credited for the car. Excess Mileage The charge for any miles you drove over the original agreement - usually between 10 and 25 cents per mile. Gap Amount If a leased car is stolen or totaled, the determination between the early termination payoff and the amount for which the vehicle is insured before the deductible and other policy deductions are subtracted. The gap amount can vary by state or lease agreement. Gap Coverage is a plan that gives financial protection if the car is stolen or totaled, one type is a waiver by the lessor, the other is a contract by a third party. Purchase Option Your right to buy the vehicle, before or at the end of the lease term, according to the terms in your agreement. Residual Value The projected market value of the car at the end of the lease. (or lease-end value) Set at the beginning of the lease, it determines the cost of the lease. The higher the residual value, the lower the monthly payments. Wear and Tear Damage or depreciation due to normal use of the car. A lease will state that a lessee is not responsible for normal wear and tear, and will define what "normal" really means. The lease sets forth what the vehicle should be like at lease's end. They may address things like the amount of tread left on the tires and the types of dents and scratches. |
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