Leasing a car can be a confusing and intimidating experience, especially if you aren’t familiar with the terms used in leasing. This is a list of common terms and their definitions used in the car leasing business. Familiarize yourself with the terms and you won’t be intimidated when you are in the dealership.
Acquisition Fee: This is a charge, usually non-negotiable, for processing a lease. You will find that many leases include an acquisition fee that may range from $395 to $895 depending on the make and model of the vehicle.
Capitalization cost (cap cost): This is actual price of the vehicle. It will be one of the factors used to compute the amount of the monthly lease payment. The Capitalization cost is similar to the price of a car that’s sold.
Cap Cost Reduction: This is similar to a down payment on a car if you were going to buy it. The Cap Cost Reduction will directly affect the amount of the monthly lease payment. Generally if you put a larger amount down your monthly lease payments will be lower. Of course there are other fees and charges that will also affect the actual monthly lease payment amount. Generally if you have a positive value on a car you trade-in you can apply the amount to the Cap Cost Reduction.
Closed-End Lease: With a Closed-End Lease the vehicle’s residual value, or value at the end of the lease period, is fixed and written into the contract of the lease. This provides the option for the lessor to purchase the vehicle at the fixed price should she want to exercise that option. Most vehicle leases are closed-end.
Dealer Participation: An amount that the dealer contributes to lower the total price of the vehicle, in an attempt to secure the customer’s business. Any dealer contribution is applied to the cap cost reduction.