The term, clean title, as it relates to car buying, means that the title for a car (used car) has no “problems” in that it has no outstanding liens (loans) that haven’t been settled and does not have a “salvage,” “rebuilt” or similar type of designation that would indicate that the vehicle has been previously stolen, wrecked, or otherwise declared a total loss by an insurance company. If a vehicle is being sold, a clean title would … Read More

The term gross cap cost, in car leasing, refers to the capitalized cost (amount to be financed in the lease) before cap cost reductions (down payment or trade credit) have been deducted. It can include the negotiated vehicle price and possibly an acquisition fee, as well as any other costs that will be added to the financed lease. Since lease finance companies’ lease contracts can be quite different, and costs itemized differently, the gross cap … Read More

The term, net cap cost, in car leasing, refers to the bottom-line capitalized cost after all costs and cost reductions have been accounted for. It’s the final cap cost figure that the lease will be based on. In would include all costs that will be included in the lease financing, including negotiated price of the vehicle, destination charge, acquisition fee, and any optional charges for extended warranties or other add-on items. Any cap cost reductions will … Read More

The term, pull-ahead lease, refers to an offer by a car dealer or car company to allow a car lease to be ended early, as part of a deal to buy or lease a new car. Typically, the deal pays off the final few lease payments on the old vehicle, while offering special incentives on a new vehicle. Consumers who want to take advantage of a pull-ahead lease program should take a bit of caution. … Read More

The term, refinance car lease, means changing the terms of a car lease to reduce monthly payment amount, or renewing a lease to accomplish the same result. It would seem to be similar to refinancing a loan. Unfortunately, refinancing a car lease is not possible. Lease finance companies don’t do it. It would essentially mean ending one lease and beginning another on what would be a used-car — and used car leases are almost non-existent. … Read More

The term, lease inception or lease inception cash, refers to the up-front money that is due at the time a car lease agreement is signed (“lease signing”). Lease inception cash includes first month’s payment, tag and title fees, down payment (cap cost reduction), sales tax on the down payment, and possibly a security deposit. Other fees, official or non-official, may also apply. Rebates may be applied to offset this amount. Lease inception cash (“cash due at … Read More

The term, lease calculator, as it applies to car leasing, refers to an online calculator such as this one that calculates lease payments and costs when provided the key factors of a lease which are: capitalized cost, capitalized cost reduction, term, residual value, and money factor. Although such online lease calculators are very convenient, payments can also be calculated by hand or on a common drugstore handheld calculator using the standard lease payment formula. A business … Read More

The term, destination fee or destination charge, as it relates to new-car buying and leasing, refers to a shipping or transportation fee that is added to the MSRP (Manufacturer’s Suggested Retail Prive) or “sticker price” of all new cars. The fee is not a “fake” or dealer “add-on” fee but is charged to dealers by the factory — the car manufacturer — for transporting the car from the factory to the dealer’s store. It’s unique … Read More

The term, 1 pay lease or one pay lease, in car leasing, refers to the practice of making a single large payment at the beginning of a lease to avoid having to make individual monthly payments. The one payment can be made in cash or with credit from a trade vehicle, or a combination of both. Essentially, a one pay lease simply combines all the monthly payments into a single payment up front although it’s … Read More

The term, lease return, in car leasing, refers to the process of returning a leased car to the lease finance company at lease-end. When a lease car is returned, it must be returned on the specified date, or earlier, to a dealer who sells the same make of vehicle. It doesn’t have to be the same dealer from which the vehicle was originally leased. The dealer accepts the vehicle on behalf of the lease finance company, … Read More

12 month car leases are rare. Car manufacturers have occasionally tried 12-month and 18-month leases, but usually discontinue them when they find that there’s little interest. Some lease finance companies will entertain such short leases if requested by customers. However, most are not interested in the relatively low investment returns of a short lease, or the relatively high administrative costs — when compared to longer leases. Because there are no industry-wide residual value guides for … Read More

The term mileage allowance in a car lease refers to the number of miles allowed annually before extra per-mile fees are charged at lease-end. Although it is expressed as an annual allowance or limit, it doesn’t mean it applies each year of the lease. It’s the total number of miles at the end of the lease that matters. For example, let’s assume a 36 month (3 year)  lease that has a 12,000 miles/year allowance. This … Read More

The term security deposit, in car leasing, refers to a cash deposit made at the time of lease inception. The security deposit is returned at the end of the lease, less any charges that may be owed, say, for excessive mileage. A security deposit should not be confused with a down payment (cap cost reduction), first or last month’s payment, or with other cash that may be due at lease signing. Actually, very few leases … Read More

The term disposition fee, in a car lease, refers to the fee that is charged at the end of the lease when the car is returned to the lease company. This fee is common and in all car leases and cannot be negotiated away. The fee is paid when the lease finance company sends a bill to the customer, possibly several weeks after the car’s return. The amount of the fee is usually $350. The … Read More

The term, pre-paid lease, refers to the concept of paying for an entire car lease obligation up-front in cash rather than having monthly payments. These are sometimes called “single-pay” leases, “single payment” leases, or “one-pay” leases. The primary benefit is avoiding the hassle of regular payments but there can be cost savings as well, depending on how the lease finance company computes the single up-front payment. It’s not like paying cash to avoid a purchase loan. … Read More

The term, down payment, in a car lease is called “capitalized cost reduction” or simply “cap cost reduction.” A down payment is often optional in car leases. It serves to reduce the amount financed with the lease and, therefore, reduces the monthly payment amount. It is not a deposit that gets returned later. Down payment is often confused with security deposit — two very different things. Down payment reduces the amount you owe on a … Read More

The term, residual value, in car leasing, refers to the predicted lease-end value of a vehicle. This value is very important in the calculation of monthly lease payments since leases are based on the difference between negotiated selling price and residual value . For a given selling price, a higher residual value will produce a lower lease payment. Residual value is a predetermined estimate by a lease company (not by a dealer) as to how much … Read More

The term, cap cost reduction, in car leasing refers to money paid in cash at the beginning of a lease that reduces the amount financed in the lease, which reduces monthly payment amount.  It’s short for capitalized cost reduction. Cap cost reduction is sometimes called down payment because it serves that purpose. But there are also other fees required at the beginning of a lease. See Down Payment for more details.

The term, short term lease, as it relates to car leasing, means leasing for a term (number of months) that is less than the normal length for most leases, which is 24, 36, 39, 42, or 48 months. Although car companies very occasionally offer 12 month or 18 month leases, the minimum normal lease is 24 months. If a shorter lease is required, consider a lease assumption (see our article Short Term Car Lease for more … Read More