Listed below are common terms you should know in vehicle
leasing.
Lessor - The leasing company.
Lessee - Consumer
Capitalized Cost - The cost of the car
to be leased.
Capitalized Cost Reduction - The cash paid
up front to reduce payments.
Residual - The estimated value of the car
at the end of the lease.
Term - The number of months covered under
the lease.
Depreciation Charge - The portion of the
payment reducing the principle lease obligation.
Close-Ended Lease - This is a fixed cost
lease. You pay a fixed monthly rental for the term of the lease
and upon expiration, you have no responsibility for the vehicles
resale value. There are mileage restrictions with this lease.
Purchase Option (FMV) - Option to buy at
lease end for fair market value.
Security Deposit - A small refundable deposit
is required at inception.
Gap Insurance - Coverage of the "gap"
between the insurance policy proceeds and the lease balance owed
if the car is stolen and not recovered or total loss caused by
accident.
Excess Mileage - Charges at End-Payment
at lease end for decreased residual value. If vehicle is driven
more than mileage allowance stated in lease.
Excess Wear and Tear Charge - Same as excess
mileage charges. Payment at lease end for decreased residual value
of vehicle that has wear and tear not considered normal.
Early Termination - Terminating the lease
contract before its full term.
MSRP - Manufactured suggested retail price.
Mileage - Number of free miles which lease
will provide. Can range from 10K to 25K per year.
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