A Guide to Car Leasing Terms (Part 2)



(Check out part one of the series here)

Once you’ve decided that leasing a vehicle is the right choice for you, it’s time to talk to your dealership.

Hearing a lot of unfamiliar terms tossed around can make you feel unsure of yourself and your choices.

To keep this from happening to you, familiarize yourself with these terms.

Capitalized cost
Also called “cap cost,” this is the price that you and the dealer have negotiated for the lease.

Capitalized cost reduction
Cap cost reduction is the term commonly used in the leasing world for a down payment.

The larger you put down, the lower your monthly payment will be.

Lender
The bank or other financial institution that is financing the lease.

You may also hear the lender referred to as “lessor” and the person leasing the vehicle as the “lessee.”

Mileage fee

With your lease agreement, you’re allowed to drive a certain amount of miles over the course of the term.

It’s normally between 12,000 and 15,000 miles per year.

If you go over the allotted mileage, you’ll be charged a penalty, which is the mileage fee.

Money factor
This is the leasing term used to describe the interest rate.

It’s expressed in the form of a decimal point and can be translated into an annual percentage rate, or APR, by multiplying the number by 2400.

Residual percentage
This is a number that represents what percentage of the manufacturer’s suggested retail price your vehicle be worth at the end of your lease.
 
Residual value
Every new car – leased or bought – will depreciate over time.

The value of your vehicle at the end of the lease term is its residual value.

Work with the right team
Understanding the terminology will be helpful as you shop for a vehicle to lease.

So will working with a team you can trust – like the ones at Serra Auto Park.

See the folks at any of our Serra Auto Park locations for help!

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