Acquisition Fee - A fee charged by the lessor bank used to cover the costs associated with the leasing process. Also known as the Bank Fee or Initiation Fee.
Adjusted Capitalized Cost - The basis used to calculate lease payments, including the vehicle price, any associated fees, optional services, and then subtracting any cap cost reduction (down payment). Also known as Net Capitalized Cost. See definition for Capitalized Cost.
Base Monthly Payment - The monthly lease payment before any applicable taxes or fees have been added to it. It is computed using two factors; the total lease term Depreciation and total lease term Rent Charge. Each factor is converted to a monthly figure and both components are added together.
Capitalized Cost Reduction - A reduction in the capitalized cost resulting from cash down, trade-in allowance, factory rebate, or dealer discount. Often it is simply referred to as a down payment.
Closed-End Lease - A lease structure in which the lessor assumes all of the residual value responsibility. In plain English; the lessee does not have to worry about the vehicle being sold at lease end for its predetermined value. This is the opposite of an Open-End lease.
Co-lessee - An individual who signs the lease with another individual or company and is responsible for compliance with the lease terms in the event the lessee does not fulfill his or her obligations. A co-lessee may be utilized to help obtain credit approval or simply to put two people such as a husband and wife on a lease together.
Current Lease Buyout - This is the figure that one may purchase a leased vehicle for prior to scheduled lease termination. Typically, this fee is calculated by adding the residual value, the total of the remaining monthly payments, and any early termination or purchase option fee. In some instances this fee is negotiable with the lease company.
Depreciation - A reduction or decline in vehicle value over the lease term. It is one of the factors used in establishing the Base Monthly Payment.
Disposition Fee - A fee charged by many lease companies to cover the expenses associated with the reselling of a vehicle at lease end. Also known as a Termination Fee.
Early Termination - The termination of a lease before its expiration or maturity date.
Excess Mileage Charge - A charge per mile when driven over the mileage amount stipulated in the lease contract.
Excess Wear and Tear - Possible additional charges if the vehicle is damaged or has wear beyond what is normally expected during the lease term. Examples of Excess Wear include cracked windshields, body damage, broken equipment, defaced interiors, or other damages.
Federal Consumer Leasing Act Disclosures - These disclosures outline the fundamental aspects utilized to calculate the lease and include any warnings of fees or penalties, which may be assessed by the lease company at lease termination. Federal Consumer Leasing Act Disclosures are found on all lease contracts written for the past several years.
Gap Insurance - This insurance covers the termination liability under the lease contract if your vehicle is deemed a complete loss before the end of your lease term. It typically covers the difference between what you owe and what your insurance company will pay for the loss. This contract feature typically comes into play when a vehicle has been totaled or stolen. Lease contracts may or may not contain gap insurance.
Gross Capitalized Cost - Refers to the total cost of the vehicle including the agreed upon value of the vehicle and any other items the lessee pays over the lease term such as an extended service contacts, acquisition fees, gap iInsurance, luxury tax, and any other cost included in the purchase of the vehicle.
Late Charge - A penalty assessed by the lease company to the lessee for failing to pay his or her payment in full by the contractual due date or within a specified grace period after that due date.
Lease - It is a written contract by which one party transfers a vehicle to another for a specified term and for a specified payment.
Lease Assumption - Refers to an third party taking over a lease from the original lessee under the terms and conditions outlined in the original contract. Typically, a lease assumption means the original lessee walks away from the lease without any future liability and the new lessee assumes all liability for the lease contract and takes the vehicle.
Lease-End Buyout - This is the contracted amount that the lessee can purchase the leased vehicle for at scheduled lease termination (end of lease). This figure consists of the Residual Value plus the Purchase Option Fee if applicable.
Lessee - The primary driver of the vehicle who signs the lease and is responsible for compliance with the contract terms and conditions. The lessee can be an individual or a company.
Lessor - The owner of the leased vehicle and the entity who sets the lease terms and conditions. Typically the lessor is a bank or vehicle manufacturer's financial subsidiary. Also known as the lease company.
Mileage Overage Charge - The mileage overage charge is the cost per mile of driving over the
total allowed miles in your lease contract. The mileage overage charge
can be found on your lease contract.
Money Factor - A fraction that is used by lessors to calculate the Rent Charge associated with a lease payment. This is the interest portion associated with a lease; although, it is not an annual percentage rate like that would be found on a retail installment loan contract. A common rule of thumb to calculate the approximate interest rate is the money factor times 2400.
Monthly Sales/Use Tax - Unlike purchasing a vehicle the customer does not pay a lump sum sales tax amount upfront in a lease. Instead the lessee will pay tax on a monthly basis for the duration of the lease period. This amount is typically determined by where the vehicle will primarily be garaged. For instance, if a vehicle is leased and will be garaged in a county or locale where sales tax is figured at six percent, the lessee will pay an additional six percent on top of the Base Monthly Payment.
Odometer Statement - A federal form used to disclose a vehicle's mileage in connection with a transfer of vehicle ownership. A specific lease odometer statement is utilized in various lease transactions including terminations as well as Lease Assumptions and Transfers of Equity.
Original Lease Term (mos) - The original lease term is the number of total months that the vehicle was originally leased. This number can be found in your lease contract.
This usually matches the number of total lease payments to be made to
the lease company. Most leases are written for 36 to 48 months but vary
by lease contract.
Purchase Option Fee - A fee that may or may not be charged by the lessor to cover costs associated with the selling of a leased vehicle to the original lessee at lease termination. The Purchase Option Fee typically ranges from $300 to $500 dollars.
Rent Charge - The interest paid on a lease. It can be thought of as the equivalent of interest on a conventional installment loan. It is one of the factors used in establishing the Base Monthly Payment. Also known as the Lease Charge.
Required Vehicle Insurance - The liability and physical damage insurance policy requirements set by the lease company. This will include a list of required coverages with minimal insurance amounts outlined that must be maintained for the life of the lease. Most contracts contain provisions for the lease company to validate proof of insurance on request.
Residual Value - The estimate of the wholesale value of the leased vehicle at scheduled lease maturity. This value will vary depended on miles contracted in the lease. This value is often the amount you may opt to pay to purchase the vehicle and the end of the lease.
Security Deposit - A refundable amount collected at lease signing that is used to cover lessee outstanding amounts owed at lease end.
Seller Cash Incentive - If a seller is willing to offer a cash payment for assuming the lease,
this is considered a seller cash incentive.
Termination Fee - See Disposition Fee.
Total Allowed Miles - This is the total miles allowed for the life of the lease contract
without paying mileage overage charges. Most leases allow for 10,000 to
15,000 miles a year. Calculate this by multiplying the annual miles
allowed by the number of years in the lease (Example: 12,000 miles per
year x 3 years = 36,000 total miles allowed).
Total Monthly Payment - This is made up of the following three factors broken down on a monthly basis and added together: Depreciation, Rent Charge, and Monthly Sales/Use Tax.
Transfer of Equity - Similar to a Lease Assumption; however, the original lessee usually remains responsible or liable in some way shape or form for the original lease contract.
Vehicle VIN - The Vehicle Identification Number (VIN) is a unique serial number
assigned to each vehicle manufactured. The VIN can be found on the front
driver's side dash board (usually through the window) or on your leasing
contract. Posting the VIN is helpful for prospective lease buyers.
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