Glossary

The term, MSRP, in reference to car buying and leasing means “Suggested Manufacturer’s Retail Price.” It is sometimes simply called “sticker price” and is the price on the legally-required window sticker of all new cars. Most new cars are sold or leased for a price that is less than MSRP, depending on the negotiating skills of the buyer and whether there any manufacturer incentives, such as rebates, available. Occasionally, a new car that has just … 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, off-lease, refers to vehicles that have been previously leased and returned to the lease finance company — and have been subsequently acquired by a car dealer who will sell that vehicle from his used car lot. Dealers often advertise such vehicles as “off-lease” because it usually implies that the vehicles are relatively new, only had one “owner”, been maintained well, and has no more than average miles. See the following article for additional … Read More

A personal car lease, sometimes called a consumer lease, is one intended strictly for personal use and is always a “closed-end” type of lease (not an “open-end” lease, which is used only for business leases). Such leases specifically require that no commercial or business use be made of the vehicle. Doing so would constitute a “fault” and would be grounds for a lease finance company to terminate the lease, repossess the vehicle, and sue for all due … 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, 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 refinance is typically used in reference a car loan or home mortgage. It means getting a new loan to pay off an existing loan, at a lower monthly payment. Those who are interested in refinancing a car loan are looking for a way to reduce payment amount to better fit their budgets. Unfortunately, refinancing an auto loan doesn’t usually have the same large effect as refinancing a home loan. Refinancing only makes sense … Read More

The term, rent charge, in a car lease contract is used to show the total of all finance charges for the life of the lease. It’s sometimes called “Lease Charge” or “Lease/Rent Charge.” The term is deceptive because it has nothing to do with renting. It’s simply a term that has been held over from the commercial equipment leasing industry. Some lease companies are doing away with the term and simply calling it what it is, … Read More

In car leasing, a residual percentage is an expression of how much of a car’s original MSRP sticker price, not selling price, will remain at the end of a lease of specific term (months) and specific mileage. An average car depreciates in value by about 50% over a 3 year lease. The remaining 50% is it’s residual percentage. Some vehicle brands and models have lower depreciation, and therefore higher residual percentages, than others. For example, 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, residualized value, in car leasing refers to the calculation of lease-end residual value on a leased vehicle as well as optional equipment that may be installed on a vehicle. Although the base price of a car will contribute to the residual value, some installed equipment or features may not, depending on lease finance company policy. As an example, let’s say that a particular vehicle has a 50% residual percentage. The vehicle has a … 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, 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

A sign and drive car lease is one in which there is no down payment requirement. In addition, there is also no usual first month’s payment and no security deposit. However the customer will likely have to pay official registration, tag, and title fees, although in some cases these fees can be rolled into the lease such that no cash is necessary at the time of leasing signing. Sign and drive leases are typically special deals … Read More

The term, spot delivery, as it relates to car leasing and buying, refers to a practice by car dealers that is perfectly legal but often causes problems for customers, especially those with poor credit. To understand spot delivery, it is necessary to understand that car dealers don’t provide loans and leases, and can’t approve customers’ credit, even though they often give the impression that they do. Actually, when a customer needs a loan or lease, … Read More

The term, sub-lease, as it applies to car leasing, means the act of transferring a lease from one party to another. Sub-leasing is usually called  “lease transfer” or “lease assumption.” Transferring a car lease cannot be done as an agreement between two individuals. It violates the original lessee’s lease contract. However, with the lease finance company’s consent and help, such a transfer is possible and is a good, inexpensive way for an original lessee to … Read More

The term, swap a lease, as it applies to car leasing, generally refers to the concept of third-party lease assumption, made popular by Swapalease.com, a company that helps with the process. An auto lease can often be transferred, or “swapped”, from the original lessee to another party, thereby avoiding the high cost of early lease termination. The other party takes over the vehicle and assumes responsibility for continuing to make monthly payments, although many car … Read More

The term, trade car, means to use the value of an existing car as credit toward the purchase or lease of a new car. When a car is traded, a dealer buys that car from the owner and gives the owner credit for it’s value as a down payment on a new car — either a purchase or a lease. Since the dealer usually intends to sell the car on his used-car lot, he only … Read More

Upside Down Car Loan – Negative Equity Loan The term upside-down generally refers to the situation in which a car buyer owes more on his auto loan than his car is worth. Being upside down causes problems when trying to sell or trade a car, or when a car is destroyed in an accident. The amount by which his loan balance exceeds the car’s market or trade-in value is called negative equity, or negative ownership … Read More

The term used car lease refers to the process of leasing other than a brand new car. The leasing of used cars is not common in the post-recession economy, although some previously owned luxury cars can be leased from specialty used-car dealers. However, there is one way of leasing used cars that is not commonly known. It involves a lease transfer from someone who needs to get out or their car lease. Read our article, Lease … Read More

The term, wear and tear, as it relates to car leasing, refers to one of two conditions in most car lease contracts. First, lease contracts specify that the lessee is responsible for replacing normal wear-and-tear items such as tires, wiper blades, light bulbs, and brakes should it be necessary during the lease. Second, contracts specify that there should not be excessive wear-and-tear when the vehicle is returned at lease-end. If a leasing customer returns his … Read More