If you want to get a good deal on a leasing, you have to understand the jargon involved. This guide will provide a leasing glossary overview for you.
Acquisition fee: This is a fee that is charged by the company for beginning a lease. Not all the leasing companies out there charge acquisition fees, but those who do usually start out at around $300 and is usually not negotiable.
Capitalized cost: This is the selling price total of the vehicle that’s being leased. This cost accounts for: title, taxes, acquisition fee, license fees, and any warranty and insurance items you choose to join in the lease costs.
Depreciation fee: This fee fits in with the monthly payment charges for the value loss that goes down at the end of the leasing period. This is figured by subtracting the estimated residual value at the lease’s end by the vehicle’s list price. The difference is taken and divided by the number of months the lease is for, resulting with the depreciation fee price. For instance, if you lease a vehicle that has a retail price of $20,000, and the leasing company gives you an estimate that the vehicle will be worth 25% of its original value at the end of a three year lease, or $5,000. The difference is $15,000, and you can divide that by the 36 months involved in the lease, giving you a depreciation fee of $416.67.
GAP insurance: Covers the cost of the lease balance if your vehicle is damaged, stolen, or lost.
Inception fees: includes any fee that is due at the beginning of the lease. These fees usually include: security deposits, acquisition fees, first payment, title fees, and taxes.
Mileage allowance: Maximum number of miles that you can drive your leased chicle for each year without receiving an excess mileage penalty. The typical mileage allowance is around 12,000 – 15,000 miles per year, although you may be able to negotiate with the leasing company.
Mileage charge: the penalty that you will incur if you exceed the mileage allowance. The mileage charge is normally around .10 – .20 per excess mile.
Money factor: A number written as a fraction that’s used in calculating your lease payments each month.
Residual value: the estimated amount of money you vehicle is expected to be at the end of the lease. Higher residual values usually mean lower monthly payments, but you may end up paying a higher cost at the end of the lease if you choose to keep it.
Termination fee/Disposition Fee: the amount of money you’ll have to pay the company at the end of the lease if you decide not to buy the vehicle.
Wear and tear charges: you will be charged these at the end of the lease if you caused any wear or tear from using the vehicle that is more than average.
