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Leasing Terms
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Price: This is also called the Capitalized Cost. This is the final price you arrive at when buying a car. This price is generally the same whether you decide to lease or buy the car - it is the starting point from which all other negotiations are based.
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Capitalized Cost of Reduction: This is an amount that, at a minimum, includes the destination (delivery) charges for the vehicle plus the acquisition fee (processing fee) for your lease. In addition, other programs require you to pay an additional amount to lower lease payments. It is important not to pay too much above the acquisition+destination fees, since this makes the lease more costly in the long run. Also, this portion may not be refunded if the vehicle is stolen or destroyed.
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Security Deposit: This is a refundable payment generally to insure the leasing company against above-average wear-and-tear that may result.
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Term of Lease: Length of term of lease in months.
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Lease APR: It is the abbreviation for annual percentage rate. This is simply the finance rate of the lease (analogous to APR).
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Residual Value of Car at Lease End: This number is generally 40-75% of the final negotiated price of the vehicle. This number is commonly artificially inflated by manufacturers' leases to reduce the depreciation of the car over the term of the lease. This, in turn, lowers your monthly lease payments. The residual value depends on the length of the lease (lower if the term is longer, since the car depreciates) and what value the car is expected to maintain over time (which can vary according to leasing company).
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