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What Leasing Terms Should I Know?
Agreed Value of the Vehicle is the dealer's selling price.
Gross Capitalized (Cap) Cost is the agreed value of the vehicle plus: the price of any warranty and dealer-provided options; license, bank (acquisition), documentation and DMV fees.
Capitalized (Cap) Cost Reduction is the sum of the lessee's additional cash down (beyond the first payment and security deposit) and trade-in vehicle equity applied to the lease.
Cash Cap Cost Reduction is the cash paid by the lessee at origination to reduce the gross capitalized cost and monthly payment.
Adjusted Capitalized (Net Cap) Cost is the gross capitalized cost less the capitalized cost reduction.
Residual Value is the estimated value of the vehicle at lease termination and normally the lessee's purchase option price.
Depreciation is the difference between the adjusted capitalized cost and the residual value; dividing depreciation by lease term gives monthly depreciation, one part of monthly base payment
Finance Base is the adjusted capitalized cost plus the residual value; it is used to calculate monthly payment.
Money Factor is a value, such as .00399, used to calculate the monthly lease charge. The higher the money factor, the higher the monthly charge.
Monthly Lease Charge is the finance base multiplied by the money factor; it is one component of the base monthly payment and compensates the lessor for tying up funds in owning a lease.
Base Monthly Payment is the lessee's monthly payment before adding monthly sales tax; it is comprised of the monthly lease charge and the monthly depreciation.
Monthly Payment is the base monthly payment plus monthly sales and luxury taxes (if applicable).
Security Deposit is collected at origination and used by the leasing company to cover and pay for any damages in excess of normal wear and tear or excess mileage on the vehicle. If there is no abnormal wear and tear or excess mileage, the security deposit is refunded at termination.
Amount Due at Lease Signing is the total of: capitalized cost reduction; sales tax on the capitalized cost reduction; first monthly payment including sales tax; security deposit; license, registration and documentation fees and luxury tax if these are not included in the gross capitalized cost. If the lessee is trading in another vehicle, this amount is included.
Drive-off is the total cash the lessee must pay at signing; it is the amount due at lease signing less trade-in vehicle value.
Bank or Acquisition Fee is the fee charged by the lessor to originate and administer the lease during its term. In some cases, this fee includes GAP (Guaranteed Asset Protection) insurance.
Gap Insurance covers the difference between the lease balance and the amount a customers' primary insurance company will pay for a vehicle that has been stolen or damage beyond repair.
Documentation Fee is the fee charged by the dealer or lessor to complete all documents and investigations during to lease origination.
Disposition Fee is the fee charged by lessors at termination for costs associated with preparing the vehicle for resale, (transportation, advertising, and auction fees etc). This fee is generally charged only if the lessor gets the vehicle back.
Purchase Option Fee is charged by the lessor to cover processing expenses incurred when the lessee exercises the option to purchase the vehicle.
Early Termination Penalties are the fee charged to the lessee in the event of an early termination of the lease. For an early lease termination the lessee is also responsible for the difference, if any, between the lease balance and the market value of the automobile.
PO Box 4685 - Santa Barbara - CA - 93140
info@vanguardcredit.com – phone 805.962.1506 – fax 323.372.1610
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