Car leasing does not work the same way as car buying. Prior to leasing a new vehicle, it is important for consumers to understand how leasing is different, as well as to understand the unique terminology associated with vehicle leases. This article explains common leasing terminology to help consumers educate themselves about the leasing process and the concepts associated with it. The words and phrases are listed below, in alphabetical order.
Acquisition Fee
Sometimes called an initiation fee, an acquisition fee is what a person leasing a vehicle pays at the beginning of the lease for the privilege of leasing a vehicle. Nearly all leases contain either an acquisition fee or a termination fee, which is paid at the end of the lease. People leasing a vehicle should expect to pay one of these fees, but not both. Be sure your lease contract stipulates which fee is required, and the amount of the fee.
Capitalized Cost
When leasing a vehicle, the capitalized cost is the negotiated selling price of the vehicle, upon which the lease payments are based. When leasing a model that is in high demand and low supply, the capitalized cost may be the Manufacturer's Suggested Retail Price (MSRP) or higher. Leases for other models should have a capitalized cost that is near dealer invoice price.
Keep in mind that many advertised lease deals are subsidized leases, meaning that the auto manufacturer determines, in advance, the financial variables used to calculate the lease payment and takes on a certain degree of risk in order to create an attractive or class-competitive payment. Generally, consumers cannot negotiate the capitalized cost of a subsidized lease.
Acquisition Fee
Sometimes called an initiation fee, an acquisition fee is what a person leasing a vehicle pays at the beginning of the lease for the privilege of leasing a vehicle. Nearly all leases contain either an acquisition fee or a termination fee, which is paid at the end of the lease. People leasing a vehicle should expect to pay one of these fees, but not both. Be sure your lease contract stipulates which fee is required, and the amount of the fee.
Capitalized Cost
When leasing a vehicle, the capitalized cost is the negotiated selling price of the vehicle, upon which the lease payments are based. When leasing a model that is in high demand and low supply, the capitalized cost may be the Manufacturer's Suggested Retail Price (MSRP) or higher. Leases for other models should have a capitalized cost that is near dealer invoice price.
Keep in mind that many advertised lease deals are subsidized leases, meaning that the auto manufacturer determines, in advance, the financial variables used to calculate the lease payment and takes on a certain degree of risk in order to create an attractive or class-competitive payment. Generally, consumers cannot negotiate the capitalized cost of a subsidized lease.
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