Leasing Glossary- Car Leasing Explained

To enable you to get a good leasing deal, you need to understand all the lingo involved in leasing.
This leasing glossary will give you an insight of the basics:

Acquisition fee: This is a charge raissed by a leasing company in order to begin a lease.
Not all leasing companies charge an acquisition fee but if they do charge it starts at aprox £300 and is very rarely negotiable.

Capitalised cost: This is the total selling price of the leased vehicle and also takes into account taxes, title, license fees, acquisition fee and any optional insurance and warranty items you decide to include into the lease to pay over your lease term as opposed to an upfront cost.

Depreciation fee: This accounts for part of the monthly lease payment and takes into consideration the loss in the value of the car at the end of the lease.

The vehicle’s sticker price minus the expected residual value when the lease ends is divided by the number of months of the lease term to give the depreciation figure.

Take this as an example if you decide to lease a vehicle with a retail price of $23,500.

The car leasing short term company predicts that after a three year lease, the vehicle will be worth 35% of its initial retail value, on this case $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 will Pay off the remaining balance on the lease if the vehicle is wrecked, stolen or totalled.

Inception fees are any charges that you are liable for at the beginning of a lease. These generally include a security deposit, acquisition fee, first monthly payment, taxes and title fees.

Mileage allowance: The maximum number of miles a vehicle which you lease can be driven in a year without incurring the excess mileage penalty.

As a rule the mileage allowance is 12,000 to 15,000 a year, you may be able to negotiate this with your leasing company to meet your requiremnets.

Mileage charges: This is a penalty that you will incur if you exceed your mileage allowance on your leased vehicle.
The average mileage charges are between 10 to 20 pence per additonal mile.

Money-factor: A fractional number, such as 0.00043, used by agents to calculate your monthly lease payments.

You can get a sketchy estimate of the annual percentage rate on your lease by multiplying the money factor by 2,400.

If a dealer quotes a money factor such as 3.4 than you can get the equivalent APR, 8.16, if you multiply by 2.4.

Take over car payments with bad credit is still a possibility and you should not be concerned if you have bad credit reference as there are deals to be had.

Residual value: This is the amount that your leased vehicle will be worth at the end of your lease accouding to your leasing company.

Higher residual values lead to lower monthly payments but if you decide to purchase the vehicle at the end of the lease this can be lesss cost effective.

Security deposits: This is a mandatory up-front one off payment that your leasing company at the beginning of a lease to safeguard against non-payment.
As a rule this is refundable when your lease ends.

Termination or Disposition fee: The amount you have to pay the leasing company at the end of your lease if you decide not to purchase the vehicle.

Wear-and-tear charges: Additional charges you may incur at the end of your lease for any wear and use the leasing company considers above average

Car leasing online with car lease specials are available and most auto companies offering car leasing contracts