auto leasing terms

The Ultimate Auto Leasing Glossary

We know navigating the leasing process can often be an overwhelming affair. But have no fear! Capital Motor Cars are here to help you better understand the ins and outs of leasing that the dealerships don’t want you to know. That’s why we compiled some of the most common leasing terms that our customers encounter every day and put them all in one place. Click on any of the links below to learn more about a specific leasing term or just take a quick glance at the provided explanations. Either way, you’re one step closer to becoming a leasing terminology expert!

Leasing Terms from A to Z

2019 list of bank acquisition fees per bank

2019 chart of acquisition fees by auto lenders.

Acquisition Fee – Most of the time, each auto manufacturer has a dedicated bank that it uses to approve customers for a lease, and this comes with its own fee, AKA an “Acquisition Fee” that is charged to you, the consumer.

Bank Lease Agreement – The most important contract that you’ll come across at signing is your lease agreement contract with the bank. Essentially this is the contract between you and the bank, stating an agreement to lease the vehicle, as the bank has purchased the vehicle from the dealership to then lease to you.

College Graduation Incentive – many automakers offer rebates and discounts to help recent college graduates lease or finance a new car.

Complimentary Scheduled Maintenance – Some automakers offer customers a certain amount of regular maintenance for things like oil changes, tune-ups and general inspections to make sure your ride is running at peak performance.

Comprehensive Warranty – AKA “Bumper to Bumper Warranty”, Comprehensive warranty covers minor vehicle ailments such as the electrical components of the vehicle, climate control, fuel systems and more.

Conquest Incentive – To entice people over the fence, some manufacturers offer juicy incentives on select models to potential car buyers or lessees who are currently driving cars from a rival brand.

Corporate Incentive Program – If you work for a specific corporation, you might also be able to save big on your next lease if your company participates in a special corporate incentive program offered through an affiliate program between certain automakers and your company.

This program removes the hassle of negotiating prices with a dealership, as pre-negotiated prices are agreed upon and offered to eligible companies, simplifying the car-buying process.

Co-signer – A friend, family member or loved one (typically with superior credit) that is willing to attach their name to your lease in order to increase your approval odds.

Dealership Cash – Sometimes, to boost sales of a specific model, banks will throw in an extra incentive called Dealer Cash in order to make lease prices more attractive to consumers and to drum up business for themselves.

Dealership Lease Agreement – Much like the bank lease agreement contract, the dealership lease agreement contract has a lot of the same information stated. That’s because the purpose of this contract is to confirm the bank’s purchase of the vehicle from the dealership on your behalf. The bank then leases the vehicle out to you for however long you selected.

Disposition Fees by auto brand

2019 graph of disposition fees by brand.

Disposition Fee – A dealership will usually charge somewhere between $300 – $500 when you return your lease, in order to cover costs like detailing the car upon return and the appropriate preparation it takes on the dealer’s behalf in order for the car to be in selling condition.

Documentation Fee – No matter which dealership in the country you’re getting your car from, you’ll run into what’s commonly known as a documentation fee, essentially the fee that the dealership is charging you to process the necessary paperwork associated with your lease.

DMV Fees – DMV fees are mostly comprised of a few factors: the vehicle title, registration fees, license plates (new or transfer), and other processing fees that are determined by the dealership.

Due at Signing – The amount of money that is required at the time of contract signing in order to complete the vehicle transaction. Usually consists of taxes, fees, first-month payment and any other money down.

Excess Wear and Tear Insurance – Excess wear and tear insurance is a protection plan designed to cover a multitude of ailments (such as dings and dents) to your car when it’s time to return it to the dealership at lease end.

Lease Cash – As with Dealer Cash, Lease Cash is also used to boost sales of specific models, with the only difference being that the auto manufacturers are the ones offering the incentive as opposed to the banks.

Lemon Law – For those unfamiliar with the Lemon Law, it basically states that a vehicle defect that substantially impairs its use, value or safety that was purchased or leased is eligible for a full refund of the vehicles purchase price or past lease payments.

Under the Lemon Law, the dealership has three attempts to fix a major issue, like a severe engine problem, before deeming it a lemon. If the issue persists and cannot be fixed to a point of repair, you’re entitled to a full refund.

Loyalty Incentive – To promote brand loyalty, some manufacturers (including Nissan, Subaru, Toyota, Honda, and Audi) offer rebates to car buyers who have already owned or leased a vehicle of the same brand. This might save you a few hundred dollars.

Mileage Overage Charge – The amount per mile automakers charge in the event you exceed your allotted miles.

Military Lease Programs – If you’re an active member or veteran of the Military, you could qualify for extra discounts on your lease as a well-deserved “Thank You” for your service. Most brands offer anywhere from $500-$1,000 off the price of a vehicle, which would drop monthly payments by a nice margin.

Money Factor – an interest rate set by the banks that is incorporated into the monthly lease price of the vehicle. The money factor is similar to the interest rate (technically known as the annual percentage rate or APR), but not the same.

MSRP – The manufacturers suggested retail price of a vehicle.

Multiple Security DepositsLexus, BMW, Mercedes-Benz, Infiniti, Toyota, and Audi will all allow you to put down multiple security deposits in order to lower your interest rate, saving you anywhere from $20 – $50 per month on your lease. Only NJ dealerships offer this leasing strategy.

One-Pay Lease – The payment structure of a lease where you pay the entire term of the lease at signing, which in many cases result in a hefty discount.

Powertrain Warranty – When it comes to Powertrain warranty, we’re talking about all of the major components of a vehicle that could run into problems throughout the duration of your lease. This includes anything engine or transmission related. Essentially, this is your mechanical warranty to make sure your car stays on the road running smoothly.

Pull Ahead Program – Pull-ahead programs allow you to terminate your lease early if you sign up to lease another car from the same brand. It’s a way for brands to reward loyal customers and keep them coming back.

Residual Value – A very common leasing term, residual value means the estimated price of the car at the end of the lease period. It’s also called lease-end value or lease-end buyout price.

Sign and Drive Deal – Common terminology among lease deals, a sign and drive deal is an extremely popular pay structure amongst lessees since it allows the consumer to drive off in a new car without paying anything at signing. All taxes, fees and other charges are rolled into the monthly lease payments.

Tax on Rebates – Auto manufacturers offer attractive rebates on specific models to help boost sales, meaning potentially huge savings for you, the consumer. For example, Jeep could be offering a bonus lease rebate of $2,000 on all 2019 Grand Cherokees models, knocking down your lease payments by a pretty substantial margin. Unfortunately, you’ll be on the hook for the sales tax on this amazing rebate you just received, but you’ll still ultimately save hundreds or thousands of dollars overall on your purchase after taxes.

Insurance Credit Score

Credit Tier System – A 1-8 credit classification system banks and dealerships use to determine the creditworthiness of a lessee. The lower the credit tier, the better the credit score, with one being the best tier.

Tire and Rim Insurance – Tire and Rim Insurance is exactly what it sounds like, insurance for your car’s tires and rims. This insurance can be purchased at any point during your lease and will cover common road hazards like flat tires due to road conditions, rim rash, structural wheel damage and more.

Vehicle Depreciation – The amount of value a vehicle loses over time, most noticeably, during the duration of the lease term.

Zero Down Lease Deal – A lease deal that is structured without a down payment that goes towards the lease payments of the car. Does not mean zero out of pocket.

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