Auto Leasing Terms For Dummies

O.K., it’s time for a new vehicle, but should you buy or lease? If you decide to lease you will~ probably be getting into a world with new and sometimes rather unfamiliar jargon. Not unlike a grandparent having a discussion with teen grandchildren.
So like employing defensive driving when merging on to a freeway, you need to defend yourself when entering a car dealer’s showroom as well. And so for those thinking of leasing their next vehicle, here is a useful glossary of terminology which you should familiarize yourself~ with prior to you negotiate a lease.
Acquisition Fee: An administrative cost levied by the leasing company for processing a lease. This fee is generally not negotiable and can have a substantial bearing on the total cost of the lease.
Base Interest Rate: This is the cost of leasing and using a car and is measured by the interest paid over the lease term.
Buy at end-of-term interest rate: It is the net interest rate for the lease if the lessee, at the end of the lease time period, buys the automobile at the end-of-lease purchase price.
Closed End Lease: Leases in which the lessee’s financial obligation rests only with the negotiated month-to-month lease payment. The lessee need only give back the automobile at the end of the lease term with no additional obligation.
Disposition Fee: A fee charged by the lessor at the end of a lease to prepare the car for sale. The lessor may apply this fee against the deposit made by the lessee at the beginning of the lease term.
Early Termination Fee: A penalty paid by the lessee for ending a lease agreement early. A lessee will pay for the depreciation of a vehicle in equal~ month-to-month payments. Since a automobile’s depreciation is greatest in the first months of a lease, terminating a lease early may subject the lessee to a penalty.
End-of-Lease Purchase Value: Additionally known as the residual value. This is the selling price at which the lessee may acquire the car at the end of the lease time period.
Mileage Allowance: Lease agreements specify a maximum mileage allowance that the car may be driven over the life time of the lease. The agreement will additionally specify the price per mile if the car is driven over and above the allowance mileage figure.
Net Interest Rate: This is the total interest rate for a lease and signifies the correct cost of the lease. The lower the net interest rate, the lower the cost of the lease.
Purchase Option: An Alternative extended to the lessee, at the end of a lease committment, to acquire the vehicle at a pre-determined purchase price.
Residual Value: It is the expected or pre-determined value of a leased car at the end of the lease contract. The stated residual value on a lease agreement is commonly the buyout price at the end of a lease phrase. The residual worth additionally establishes whether the lessee should purchase the car at the end of the lease time period. If the residual worth is less than the true marketplace value it would be advantageous for the lessee to buy the car.