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2torial #0618:
Learn2
Lease a Car (Continued)
 Know the language
Like any new territory, the land of the lease
has a distinctive lingo. Understand buzz phrases
such as the following:
- MSRP: The Manufacturer's Suggested
Retail Price, set by the car company. This price
must be posted in a new car's window, but there
can be additional charges that vary from dealer
to dealer.
- Total capitalized cost: the base
price of the car, sometimes called "Invoice
Price." You'll want to negotiate from this
buying price.
- Capitalized cost reduction: the
deposit on the lease which reduces the monthly
lease payment.
- No money down: usually this term is a
red flag, one of those vague (possibly sneaky)
descriptions. Often, they'll say there is no
"money down." In reality, you must come up with
a few payments to qualify for the lease.
- Depreciation: the decrease in value
of the car during the lease term. This is
usually assessed on a monthly basis.
- Residual value: this is very
important to be clear on. It's the car's
predicted value at the end of the lease term.
It's about .65 for two years, .57 for three
years and .41 for five years.
- Early termination charge: the fee for
ending the lease earlier the date specified on
the lease. Note: if the lease ends because you
wreck the car in an accident, you may be charged
with this fee.
- Liability after casualty loss
coverage: an agreement with the leasing
company, also known as gap coverage. In case of
fire or theft, this covers any remaining costs
between the value of the car and what the
insurance company actually pays.
- Money factor: the leasing company's
interest rate to calculate finance costs.
Multiply by 2400 (that figure is common to all
leasing companies) to get the annual percentage
rate. For instance, the interest rate on a .0035
money factor (x2400) will be 8.4%.
Deposits: this is money you pay to offset
possible return fees. Unlike the capitalized
cost reduction payment, the deposit does not
bring down any of your capitalized costs.
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2
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