Glossary

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

Car leasing in Illinois will become much less expensive on January 1, 2015 due to changes in the applicable tax law. Previously, taxes were based on the full value of a leased vehicle, even though the leasing customer never received full use of the vehicle. Now with the new law, tax will be applied to each monthly payment as it is in most other states in the U.S.. For further information regarding the Illinois tax change, search … Read More

The term incentives as it relates to new car buying and leasing refers to special promotional offers from a car manufacturer to help sell or lease their vehicles. These offers are usually time-limited, often being good for only one month. Furthermore, the deals are typically restricted to only certain vehicle models and styles. Not all car companies offer incentives every month. Incentives can change from month to month. Forms of incentives are: factory to customer rebates, low interest loan deals, zero … Read More

The term, invoice price, as it relates to car pricing, refers to the wholesale price that car dealers pay for the cars they purchase from car manufacturers. Since all car dealers are independent businesses, they buy wholesale and sell retail like most other businesses. Simply stated, the difference between invoice price and whatever price a dealer is able to sell his cars for represents his profit. All businesses have to make a profit to pay … Read More

The term lease agreement or lease contract, in car leasing, refers to the legal contract that is signed at the time of lease inception in which the lessee (person who is leasing) agrees to the conditions of the lease set by the lessor (lease finance company). This includes the price of the vehicle that the lease is based on, any other costs and charges, trade-in credit (if any) the term (lease months), mileage allowance, monthly payment … 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, lease car with bad credit, typically refers to the need to find a way to lease a new car when the consumer has a less-than-perfect credit history, a low credit score, or has a high debt-to-income ratio. The problem typically reveals itself when a consumer attempts to lease a car and the dealer pulls his/her credit score, which is a numerical representation of the consumer’s entire credit history, and finds that the score … Read More

The term lease cars for sale refers to cars that have previously been leased and then returned to be sold by used car dealers. The more common term for these types of vehicles is “off-lease.” Dealers who sell off-lease cars generally sell them as “certified” cars, meaning they are relatively new, with low mileage, and have been completely inspected. Such off-lease cars are attractive to customers because they are of high-quality and in near-new condition. Although … Read More

A Lease Deal Calculator is a unique type of car lease calculator that evaluates specific lease deals to determine if a deal is good, bad, or just average by simply entering a few key numbers. LeaseGuide.com provides two such calculators. One is the Lease Deal Calculator and the other is the Lease Evaluator in our Lease Kit. The difference is that the Evaluator is more detailed and provides a more accurate result.

The term, lease formula, in car leasing, refers to the math formula used to calculate monthly payments. The standard formula used in the auto leasing business by car companies and dealers is explained in detail, with examples, in the following article: Lease Payment Formula. Although the strict time-value-of-money (TVM) formula for leasing is a bit more precise, the car leasing industry has chosen to go with the simplified standard formula, as discussed in our article referenced … 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 option, in car financing typically refers to the availability of leasing as one of the ways to acquire a new car. The other options are 1) paying cash, and 2) a loan. All car dealers offer leasing as a option for those who prefer it. For many automotive consumers, leasing offers advantages. Approximately 30% of all new-car sales today are leases.  Luxury cars are leased at even higher rates. Although having a lease … Read More

The term lease payoff, in car leasing, refers to the process of ending a lease before the normal end-of-lease date. It’s also called a lease termination or early termination. A car lease can be ended early by returning the vehicle and paying off the remaining lease balance, less future finance charges, and less the “realized value” of the vehicle, a process that is explained in the “small print” of all car lease contracts. See our article … Read More

The term lease penalty, in car leasing, usually refers to the extra fees charged at lease-end for excessive mileage or wear-and-tear.  Lease contracts specify a per-mile charge for any miles that exceed the total miles allowed for a lease. Although not as specific, contracts also state that charges will apply for excessive dings, scratches, unrepaired accident damage, broken or cracked glass, or non-working equipment. In most cases, a contract will specify the size of scratches or … Read More

The term lease price refers to the negotiated or discounted price of a leased vehicle. Just as price can be negotiated when purchasing a car, price can also be negotiated when leasing. The lower the price, the lower the monthly lease payment. Price is the only factor that dealers can negotiate in a lease. All the other factors, such as money factor, residual value, and term are usually dictated by the dealer’s car company — … Read More

The term, lease purchase option, in car leasing refers to the option in all lease contracts for the lessee (person doing the leasing) to purchase the vehicle at the end of the lease, instead of returning it. The purchase price is always specified in the lease contract at the time the contract is signed at the beginning of the lease. Such a purchase is made from a lease finance company, not a car dealer. A … Read More

The term, car lease rate, refers to the finance rate in a car lease. This rate is called, Money Factor, and is shown as a very small number, such as .00245, which is equivalent to 5.9% APR. Lease rate, or Money Factor, can be converted to equivalent interest APR by multiplying Money Factor by 2400. Or, if you have an interest rate and want to convert to Money Factor, simply divide APR interest rate by … 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

The term,  take over a car lease, refers to the idea of finding an inexpensive way to get out of a car lease — or an inexpensive way to drive a car by taking over a lease from someone who is desperate to get out. Other terms are lease takeover, lease trade,  or lease assumption. A car lease can often be transferred from the original lessee to another party who would like a relatively short-term lease … Read More

The term, lease tax, in car leasing usually refers to sales tax and how the tax is applied to a lease. The way that sales tax is applied to car leases varies by state. The most common way, and the way it’s done in most states, is that sales tax is applied to the monthly payment, not the entire value of the vehicle. This is one of the benefits of leasing. Using this method, as … Read More

The terms, lease-purchase or lease-to-own, as related to car leasing are not very appropriate, and are often misused in this regard. These are terms more appropriate to real estate or furniture sales. However, some used car dealers offer what they call “lease” or “lease-to-own” vehicles, which are actually high finance rate purchases or expensive rentals. Car leasing is an alternative method of financing. Purchasing with a loan is the other method. However, these two methods … 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 mileage fee or mileage penalty  in car leasing refers to the per-mile charge at lease-end for excessive miles driven during the lease — miles over the limit allowed. Lease mileage fee is generally $0.15 per mile for cars that cost up to $30,000, $0.20 a mile up to $50,000, and $0.25 or more for cars that cost more than $50,000. The fee for some luxury vehicles may be higher. Mileage charge is always … Read More

The term, money factor, specifies a finance rate for a car lease. It is similar though not quite the same as interest on a loan, and expressed totally differently. Money factor, which is sometimes called “lease factor” or simply “factor”, determines how much you’ll pay in finance charges each month during your lease. The higher the money factor, the higher your monthly payment and the more you’ll pay in total finance charges. Therefore, when shopping for … Read More

The term, Money Factor calculator or Money Factor to Interest Rate converter, as it relates to car leasing, refers to either 1) converting APR interest rate percent to money factor, or 2) converting money factor to APR interest rate percent. It’s easy enough to do the conversion in either direction. If you already have APR interest rate, simply divide by 2400 to get money factor. Or if you have money factory and want APR interest rate, multiply … Read More