Balloon Payment. A large final payment due at the end of a lease. (Allows a lower monthly payment.
Capitalized Cost (Cap Cost). The base price on which a dealer will agree to lease a vehicle.
Capitalized Cost Reduction. A cash (or trade) down payment the leasing customer makes to reduce the base leasing price (Cap Cost).
Dealer Cost (Invoice Price). The cost of the vehicle to the dealer as invoiced by the manufacturer.
Lease Term. The length of a lease, usually specified in months.
Leasing Fees. Title, lease application, license, security, documentation fees, etc.
Lessee. The consumer.
Lessor. The company that owns the automobile.
Gross Capitalized Cost. The price of the car for leasing purposes.
Guaranteed Auto Protection (GAP). Coverage protecting the amount between what you owe on the lease and the amount covered by insurance in the event your leased vehicle is stolen or destroyed.
Manufacturer’s Suggested Retail Price (MSRP). A price set by the car manufacturers which, by law, must be posted on a window sticker.
Mileage Allowance. The amount of maximum mileage you can put on the car during the lease term. There will be charge per mile for miles driven over the allowance.
Money Factor. T his figure, also known as the lease factor, lease rate, or monthly lease fee, is the interest rate built into all leases. It is leasing’s version of the annual percentage rate of interest (APR) that is charged to people who buy on credit. Leasing companies do not usually disclose the money factor except when competing with other lessors.
Monthly Lease Payment. An amount which amortizes the difference in a car’s value when it’s new and when it’s turned back to the dealer. This is calculated as Cap Cost minus Residual Value. A finance charge (money factor) and possibly state sales taxes will be included in the monthly lease payment.
Open-end Lease. You make scheduled monthly payments but a balloon payment is due at the end of the lease term.
Payment Amount. An amount paid by the lessee that may include interest, overhead and profit.
Residual Value. The automobile’s value at the end of the lease. Also known as guaranteed future value or lease-end value. It is often expressed as a percentage of the Manufacturers Suggested Retail Price (MSRP). The higher the residual value, the less depreciation you pay. The residual value may be a negotiable figure. To determine it, many dealers consult a publication called Automotive Leasing Guide, a useful tool for predicting future value.