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Introduction

What is a lease?

The Mathematics of Leasing

Lease Calculator

 

Glossary

Adjusted Cap Cost
The figure used to calculate your lease after applying the Cap Reduction (downpayment).

Base Payment
The total arrived at by adding the monthly Rental Charge and the Monthly Depreciation.

Cap Cost
This is the selling price of the vehicle. This is what you have agreed to pay for the car or truck you are leasing. This is a negotiated figure no matter what you may be told.

Cap Reduction
Simply put, an amount applied to the Cap Cost to reduce the amount of the initial lease price. Think of it as a downpayment. The Cap Reduction has serious benefits as you will see while doing lease computations.

Closed End Lease
The lease du jour these days. Closed simply means that the leasing company options are limited and yours aren't. There was a flip flop of terms a few years back where a "closed end lease" was an "open end lease" and vis versa. The important point is, you want a "closed end lease".

Depreciation
The dollar difference between the Adjusted Cap Cost and the Residual. This amount is your responsibilty to pay and it is a portion of your monthly payment. For example, on a 36 month lease, the total depreciation is divided by 36 so that you pay 1/36th of the total each month.

Gap Waiver
Commonly called Gap Insurance, which it IS NOT. You will receive no insurance policy. What you do receive is the lessors agreement to terminate your lease and not charge you for any deficiencies between what your vehicle is worth and the amount the you owe the the vehicle should your vehicle be totalled in an accident, or stolen and not recovered.

MSRP
Manufacturers Suggested Retail Price - This is the "Window Sticker" as delivered to the dealer from the manufacturer BEFORE any modifications, dealer added equipment, Doc Fees, etc., are added at the dealership.

Money Factor
The interest amount charge on the lease. It is called the Money Factor because it is a fraction of the percentage rate.

Non-Disclosed Lease
This was a real stinker a few years ago. The non-disclosed part applies to the Cap Cost which was not shown on the lease agreement. The lease was written very much like a rental agreement in this respect. In 1998 this went away for good.

Open End Lease
See "closed end lease". The same thing only different. Just kidding. The "open end lease" is a dinosaur that gave all rights to you and your car to the leasing company or bank. Except in some rare instances you will never hear an "open end lease" mentions these days. The consumer lease you are interested in is a "closed end lease". Just remember that, make sure you read it on your lease agreement, and you're okay.

Residual
The projected value of the vehicle at the end of the lease. Also referred to as the "Buy Back". It is a figure arrived at arbitrarily by the lessor.

Security Deposit
A security deposit is many things to many people depending on who you ask. Some will tell you it is to cover your deductible in case you total the vehicle. Others will tell you it is to protect the bank in case you fail to make a payment. Some others will tell you it is to cover damages at termination, so the bank doesn't have to chase you to collect. And still others will tell you that it's a way for the bank to collect more of you money and sit on it for the term of the lease earning interest. The last two are closest to the truth.

Total of Payment
The total that you pay monthly. This is a total of the the Base Payment and Use Tax.

Use Tax
Think of the as sales tax, but it is applied monthly, as a general rule, which usually works in your favor.

 

 

 

 

 

 

 

 

 

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