Atlantic Auto Group Decoder: Leasing A Vehicle

We are back today with another edition of Atlantic Auto Group’s Decoder for Automotive Terminology!  Since buying and selling cars is not a part of most people’s daily or even weekly routines, we’re here to help.  Today’s blog is all about highlighting key terms and phrases commonly used in the industry so that our customers can drive off the lot with confidence.  Thanks to our handy-dandy guide to automotive terminology, you’ll be able to “talk shop” like the best in the business.  If you’d like to learn more about key phrases and automotive vocabulary before you embark on your car buying journey, look no further than today’s blog post.

 

 We hope that these pointers will help you feel more confident in understanding “the fine print” of your leasing and financing agreements.  As you embark on your journey for car shopping and leases, you’ll be able to breathe a sigh of relief with the security that you know you’ve done all your research thoroughly!  Check out our tips and tricks to being informed about the leasing process before you head into the dealership to shop.

 

If you have any questions about leasing and financing a vehicle, we’re here to help.  Our associates are standing by and ready to answer your questions!  We’ll have you on the road and off on your next adventure in no time at all.

 

 

 

How To Prepare For Leasing a Vehicle

 

• Do your research.  Make a list of your must-haves when it comes to your Daily Driver Vehicle.  Know what style of vehicle you’re looking for (Sedan, SUV, Truck, etc.)  Look at the different price points for the vehicle that best fits your lifestyle and needs, and explore the options available to you in a reasonable range. Thoroughly research the pros and cons of each feature, option, and design.  Take some test drives of each type to see what feels most comfortable for you.  

• Set a budget. Be sure to calculate your personal budget expenses to calculate the costs of leasing, insuring, and operating your intended vehicle.  There may be specific fees and costs associated with the leasing agreement at the time of signing.  In addition, you’ll need items such as comprehensive coverage, gap insurance, or wear-and-tear coverage.  Be sure to budget these into your monthly cost estimates!

• Learn car leasing terminology.  Make sure you read today’s handy guide of vocabulary words thoroughly so you can more easily understand the terms of your leasing agreement and payment plans.  Figure out if you have a “Closed-End Lease” or an “Open-End Lease,” and be sure to read all of the fine print before signing.

• Explore your options for returning the car or keeping it at the end of your lease.  Many lessees prefer to trade-in their lease for a newer model, but others prefer to extend the lease term or even purchase the car outright.  Two to three months before your lease ends, you’ll want to explore your options and see what best fits your budget and lifestyle.  If you’re returning your vehicle or extending the lease, you may be subject to inspection for your vehicle’s condition as per terms and conditions of your lease.

 

 

Key Terms to Know When Shopping for Leased Vehicles

 

• Acquisition fee

  • Also known as a "bank fee," an "administrative fee" or an "assignment fee." For a vehicle lease, a fee charged by the leasing company at the inception of the lease that is intended to cover a variety of administrative costs, such as obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease into its data and accounting systems.

 

• APR

  • Annual Percentage Rate. The cost of credit (i.e., the interest rate) expressed as a yearly rate.

 

• Cap reduction

  • Capital reduction. In a vehicle lease, any trade-in amount, cash down payment or rebate amount that reduces the cost of the vehicle being leased (its "capitalized cost").

 

• Drive-off fees

  • Also referred to as "Total Due at Signing." The total cost that must be paid by the lessee at the inception of a vehicle lease, which typically includes the first months lease payment, any security deposit required by the leasing company, any acquisition fee charged by the leasing company, any documentation fees charged by the dealer, and various state registration fees.

 

• Incentive

  • Any kind of financial assistance from a vehicle manufacturer that, by reducing either the net price or the cost of financing/leasing, motivates customers to buy/lease a new vehicle. The most common incentives are customer cash rebates, low-interest financing and leases that are subsidized by the manufacturer.

 

• Mileage allowance

  • In a vehicle lease, the number of miles the lessee is permitted to drive over the term of the lease without incurring an excess mileage penalty.

 

• Money factor

  • Also referred to as a "lease factor" or "lease fee." An auto leasing industry term for expressing the interest rate used to calculate the monthly lease payment, and equal to the leases APR divided by 2,400. (For example, an APR of 7.2% equals a money factor of 0.0033.)
     

• Payoff amount

  • Also called the "buyout amount." The amount that, at any specified time during the term of a vehicle lease or loan, is required to be paid in order to discharge the remaining obligation.
     

• Purchase option

  • The right given to a vehicle lessee to purchase the vehicle at the end of the lease term for an amount equal to the vehicles residual value.
     

• Residual value

  • A vehicle leasing companys assumption of what a vehicle will be worth at the end of the lease, which is a factor used to determine the monthly lease payment. (The higher the residual value, the lower the monthly payment.)