Financing & Leasing Terms

Annual Percentage Rate (APR) Based on simple interest for one year. Can be negotiated with bank or dealer.

Capital Reduction Amount the lessee pays (or vehicle trade-in) to reduce a leased vehicle's purchase price.

Closed-End Lease Vehicle goes back to the lessor at lease end with no further obligation on the part of the lessee.

Depreciation The difference between the original purchase price and a vehicle's resale or residual value.

Excess Fees Charged to cover any costs involved upon a vehicle's return at least end (disposition fee); penalties for terminating a lease prior to lease end (early termiantion fee); per-mile surcharge for putting miles on beyond agreed-upon amount (excess mileage fee).

Finance Charge/Lease Rate What you're charged to use the financier's or lessor's money.

Gap Insurance Covers the disparity between what's insured and what's owned on a lease. Good to have in case of theft or accident.

Lessee You.

Lessor The dealer or party that retains the title to the vehicle you're leasing.

MSRP Manufacturer's Suggested Retail Price. Required by law to include all charges/equipment and be posted on window of all new cars. Dealer's Cost runs 6-20% below MSRP.

Open-End Lease Lessee is responsible for purchase/sale of vehicle at lease end.

Residual Value Selling price of a vehicle at end of lease or finance period.

Term Number of months of the lease or finance period