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Written by Chad Cook
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Thursday, 11 January 2007 |
Leasing Glossary
In order to get a good leasing deal, you need to understand
leasing jargon. Read over this leasing glossary to get an
overview of the basics:
Acquisition fee: A fee charged by a leasing company to start
a lease. Not all leasing companies charge an acquisition fee
but it starts at around $300 and is seldom negotiable.
Capitalised cost: The total selling expense of the leased
vehicle. This also accounts for taxes, title, license fees,
acquisition fee and any optional insurance and warranty
items you elect to gather into the lease and pay overtime
rather than upfront.
Depreciation fee:Forms a portion of the monthly sublet
payment charge and accounts for the loss in the value of the
car at the end of the lease. The vehicles list price minus
the expected residual value at lease end is divided by the
number of months in the sublet to pass the depreciation fee.
Suppose you decide to lease a vehicle close to a retail cost
of $23,500. The leasing company estimates that after a three
year sublease, the vehicle will likely be worth 35% of its
starting retail value, or $8,225. The difference, $15,275,
divided by the number of months in the lease, 36 months,
gives us the depreciation fee ($424)
GAP insurance: Pays off the lease balanced if the vehicle is
wrecked, stolen or totalled.
Inception fees: any fees that are due at the starting of a
lease. These typically take in a security deposit,
acquisition fee, first monthly fee, taxes and title fees.
Mileage allowance: The maximum number of miles a leased
vehicle can be ridden a year without incurring an excess
mileage fine. A normal mileage toleration is 12,000 to
15,000 miles a day, even if this is negotiable with your
leasing company.
Mileage charges: a penalty that you incur if you surpass
your mileage allowance on a leased vehicle. Typical mileage
charges are 10 to 20 cents per excess mile.
Money-factor: A fractional number, such as 0.00043, used in
calculating your monthly lease payments. You can get a
lumpy estimate of the weekly portion rate on your lease by
multiplying the cash factor by 2,400. If a dealer quotes a
cash factor such as 3.4 than you can get the equivalent APR,
8.16, if you multiply by 2.4.
Residual value: Residual value is the amount of money the
leasing company says your leased vehicle will be of value
when your lease ends. Higher residual values lead to lower
monthly payments but higher lease-end buyers cost, if you
decide to hold the vehicle.
Security deposits: an up-front amount that your leasing
company is required at the starting of a lease to safeguard
against non-disbursement. This is generally refundable at
the end of your lease.
Termination or Disposition fee: The total you must pay to
the leasing company at the end of your lease if you decide
not to purchase the vehicle.
Wear-and-tear charges: Extra charges you must pay at the end
of your sublet for any wear and use the leasing company
considers above standard.
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Last Updated ( Sunday, 19 August 2007 )
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