Knowing lease terminology can help you negotiate the best deal

Knowing lease terminology can help you negotiate the best deal
The following is a partial list of terms frequently used in auto leasing contracts. Knowledge of the terms can help you negotiate the best lease deal.
Acquisition Fee: Extra fees, usually, $250-$500, the dealer tacks on to your lease agreement.
Dealers may claim it’s a fee to process the paperwork, but banks don’t charge an “acquisition fee” for car loans.
Capitalized Cost: The value of the car at the beginning of the lease.
Monthly Depreciation Fee: One of three components of the lease payment. [The others being interest and taxes.]
Disposition/Termination Fee: A charge for fixing up the vehicle for resale.
Early Termination Fee: A penalty for ending the lease before the proscribed time. It can run up to several thousand dollars.
Excess Mileage: Most leases limit the number of miles placed on the vehicle. There is a charge for additional mileage over the limited amount. Lessors should note that up-front payments for extra mileage are nonrefundable.
Excess Wear and Tear: Have the dealer explain what constitutes excess wear and tear.
Also, double check with the dealer to see if the car must have four matching tires when you turn it in. If it’s required and the tires don’t match, the leasing company may charge you for four new tires.
Gap Insurance: Pays for the gap between the value of your car and the amount you still owe on your lease, including a possible penalty for early termination [for example, if the car is stolen or totaled.]
Interest Rate: Rather than quoting interest rates, a leasing company might site “money factors.”
To arrive at the equivalent APR interest rate, multiply the money factor by 2,400.
MRSP: Manufacturer’s Suggested Retail Price, or sticker price. Vehicles are generally sold at a cost below the sticker price.
Purchase Option Fee: A negotiable fee charged if you wish to buy the vehicle after leasing it.
Purchase Option Price: Usually the residual value of the vehicle. See below.
Residual Value: The value the leasing company estimates the car to be worth at the end of the lease. The higher the residual value, the less you pay each month to lease it. Ask your bank or credit union for residual values to check the leasing company’s calculations.
Sales Tax: Amount of tax paid with your monthly payment. Make sure you are only charged for the value of the car you are using, not the full value.
9-9-1999 Small Business Times, Milwaukee

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