Leasing a New Car?

Here are a few definitions of basic terminology.

CAPITALIZED COST OR GROSS CAPITALIZED COST:  The negotiated price of your vehicle.  It includes anything extra purchased with the vehicle. (Service contract, rust protection, insurance, etc.)

NET TRADE-IN ALLOWANCE:  This represents the difference between the loan balance on your car and the amount the dealer is paying for your vehicle.  It is your trade-in equity. If the dealer is paying more than you owe on your trade in, you have positive equity. If you owe more than the dealership has agreed to pay, you have negative equity.

CAPITALIZED COST REDUCTION:  This figure represents your down payment, trade-in equity and any rebates, reducing the capitalized cost of your vehicle before a monthly payment is calculated.

ADJUSTED CAPITALIZED COST: This is the estimated worth of your car at lease end. This figure affects your monthly payment.  The higher the residual value of a car, the less you will pay each month to lease your car.

DEPRECIATION:  The value lost on your vehicle during the lease.  This figure represents the difference between the adjusted capitalized cost and the residual value.

RENT CHARGE: another way to tell you the total amount of interest you are paying.  If your lease says “lease charge” it is the same thing.

EARLY TERMINATION FEE: If you terminate the lease before its term, a penalty payment may be added to the amount you owe the bank.

PURCHASE OPTION: The amount you’ll pay the car should you choose to buy it at the end of the lease.

All values agreed to must be on the lease and stated, as agreed.