Automobile Lease Glossary
To many, leasing seems to have a vocabulary
of its own. Understanding leasing terms can help you demystify this often
confusing process. Here are the key words and their definitions. If you may have
any other questions, please feel free to
contact your Best Auto Lease USA
Lease Specialist today.
Car Lease Terms and Definitions
Acquisition Fee
A fee charged by a lessor to cover the administrative costs of preparing,
approving and administrating the lease. May be paid up front or included in
the gross capitalized cost.
Adjusted Capitalized Cost
The amount capitalized at the beginning of the lease, after adding any fees
or other charges to be included, and subtracting any capitalized cost
reductions, such as rebates, trade-in allowances and cash reductions.
Allowable Mileage: This is the number
of miles you are allowed to drive over the term of the lease. Often this is
stated as the number of miles per year you can drive. The average lease
allows 15,000 miles a year. If more miles are needed to fit your driven
needs we can accommodate this for you. On a three-year lease, that means you
can drive a total of 45,000 miles. If the allowable miles are exceeded, you
typically must pay between 10 and 17 cents per mile. See Excess Mileage
below.
Capitalized Cost
Often used to refer to the negotiated selling price of a vehicle to be
leased. May be used to refer to the gross capitalized cost or the adjusted
capitalized cost.
Capitalized-cost Reduction
The total of any cash payment, trade-in allowance or rebate used to reduce
the gross capitalized cost. The capitalized cost reduction is subtracted
from the gross capitalized cost to get the adjusted capitalized cost.
Here at Best Auto Lease USA we structure all our leases with all
rebates, discounts, dealer cash and with most domestic vehicles we include
our part of the 3% dealer hold back.
Captive Finance Company
A leasing or finance company that is owned by or otherwise associated with a
particular vehicle manufacturer, distributor, dealer. generally these leases
are known as a Sub Vented Lease. See Sub Vented Lease Below.
Closed-end Lease
A lease that allows the lessee to return the vehicle at the end of the lease
term with no further financial obligation, assuming that the lessee has
complied with all of the terms of the lease. The lessee may be responsible
for a disposition fee, if it is part of the lease agreement. There may be
additional charges according to the terms of the lease for any excess
mileage or excess wear. The lessee is not responsible for any difference
between the residual value, as stated in the lease, and the actual value of
the vehicle at the end of the lease. Here at Best Auto Lease USA
most of our leases are Closed-end. We only use Open-Ended leases for
commercial and some high-end Exotic car leases.
Depreciation
The amount the vehicle declines in value over the term of the lease. The
depreciation may be calculated by subtracting the residual value from the
adjusted capitalized cost. Using this method, the depreciation amount will
also include any amounts that were added by agreement to the price of the
vehicle to arrive at the gross capitalized cost.
Disposition Fee
The fee charged by the lessor if the lessee does not purchase the vehicle at
lease-end, for costs associated with preparing the vehicle for resale and
selling the vehicle. The disposition fee must be disclosed in the lease
agreement.
Early Termination
Ending a lease before the scheduled termination date. The lessee will
typically be required to pay an early termination charge as described in the
lease agreement.
Early Termination Charge
The fee charged to a lessee in the event of an early termination of a lease.
Penalties vary from lease to lease and the method of calculation is
determined at lease inception and explained in the lease agreement.
Early Termination Payoff
The total amount the lessee owes if the lease is terminated early, before
subtracting any credit for the value of the vehicle. The payoff is
calculated as described in the lease agreement.
Excess Mileage Charge
The fee charged for each mile in excess of the predetermined mileage limit,
as set forth in the lease agreement. The excess mileage charge varies
depending on the type of vehicle, and is typically between $0.10 and $0.17
per mile.
Excessive Wear and Tear Charge
A charge collected by the lessor at the end of the lease for damage to the
vehicle that is beyond what is allowed by the terms of the lease. In a
consumer lease, excess wear and tear or normal wear and tear will be
specifically defined.
Gap Coverage
A type of insurance coverage that covers the difference between the payoff
of the lease and the amount covered by other insurance coverage, when a
vehicle is damaged or stolen during the term of the lease. Most gap coverage
requires that the lessee not be in default under the terms of the lease.
Gross Capitalized Cost
The negotiated price of the vehicle, plus any other amounts you agree to
include in the capitalized cost, such as fees, insurance premiums, service
contract premiums or prior vehicle loan or lease payoff.
Lease Term
The period of time covered by the lease agreement.
Lessee
The party entitled to possession and use of the vehicle according to the
terms of the lease.
Lessor
The legal owner of the property that is leased.
Loan Origination Fee
The fee charged by a lender to prepare loan documents, make credit
checks, inspect and sometimes appraise a property; usually computed as a
percentage of face value of the loan.
Mileage Allowance or Mileage Limit
The total amount of mileage the vehicle may be driven over the term of the
lease, without incurring liability for additional mileage charges.
Money Factor
A number often used by lessors to calculate the average monthly rent charge
portion of the lease payment.
MSRP
The manufacturer's suggested retail price.
Open-end Lease
A type of lease in which the lessee is responsible for the difference
between the residual value and the realized value at the end of the lease.
The lessee may be entitled to a refund if the realized value is greater than
the residual balance.
Purchase Option
The lessee's right to purchase the leased vehicle, either at the end of the
lease or during the lease term, as specified in the lease agreement. The
lease agreement may or may not include a purchase option.
Purchase Option Fee
A fee in addition to the purchase price that is required to exercise a
purchase option, according to the terms of the lease.
Realized Value
A value assigned to the vehicle at lease termination. Check your lease
agreement for a definition that may range from the value actually received
by the lessor, the highest offer received by the lessor, the vehicle's "fair
market value," the wholesale value or the retail value.
Rent or Rent Charge
The portion of the monthly lease payment that is in addition to the
depreciation and amortized amounts.
Residual Value
The lease-end value of the vehicle, established at the beginning of the
lease. This value is used in determining the monthly lease payment. The
residual value is also used to determine the depreciation and other
amortized amounts that go into determining the monthly lease payment.
Security Deposit
A refundable deposit, usually equal to one monthly payment, collected by the
lessor at the beginning of the lease to offset any amounts due under the
term of the lease.
Sub Vented Lease
A lease that is subsidized by the manufacturer or other lessor. Many sub
vented leases offer lower monthly payments by utilizing a higher residual
value than other lessors, or by offering a lower rent portion of the monthly
payment. Here at Best Auto Lease USA, we do not recommend these
types of leases. Generally this will get you into a trap with negative
equity and huge early pay-off penalties. This is what normally takes place
with Manufacture and Dealer programs.
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Quote
Best Auto Lease USA,
a division of
B. Austin Enterprises, Inc - Plano
CALL NOW -
Toll Free
877-85 L E A S E
/ 877-855-
3273
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214-975-6300
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