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| Thursday, November 20, 2008 |
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Glossary
Click on one of these common car terms for a "plain English" explanation: Acquisition Fee A fee charged by your lending institution to cover the expenses incurred for things such as credit reports, insurance verification, and processing of the application. 
Back to TopAPR The percentage of interest you pay for one year on the unpaid balance of a loan. APR applies to vehicle loans but not to leases.
Back to TopCapitalized Cost The equivalent of the purchase price of a leased vehicle. Whereas a new car has a "price," a leased vehicle has a "capitalized cost" (the amount that accrues interest).
Back to TopCap Cost Reduction Refers to a variety of ways to reduce the capitalized cost, such as a rebate, trade-in, or down payment.
Back to TopCaptive Finance Company A financial organization that is affiliated with an automotive manufacturer or distributor. General Motors Acceptance Corporation, or GMAC, is an example.
Back to TopClosed-End Lease A lease where the consumer is not liable for the vehicle's projected value (at lease's inception) and its actual value (at lease's end). The consumer is, however, liable for excessive wear and mileage. (See Open-End Lease.)
Back to TopConsumer Lease A lease to an individual who intends to use the vehicle primarily for personal, family or household use, rather than for business. A consumer lease can have a total contractual obligation of no more than $25,000.
Back to TopDealer Discount Any amount with which the dealer reduces the manufacturer's suggested retail price.
Back to TopDepreciation A vehicle's decline in value over a period of time.
Back to TopDisposition Fee A fee charged by most lessors to cover the expense of preparing and reselling (or auctioning) a leased vehicle at the end of its lease. Also known as Termination Fee.
Back to TopDocument Fee A fee charged by some dealers to cover the cost of preparing lease or loan documents.
Back to TopDown Payment The cash you give to the dealer or lessor to reduce the vehicle's price. It's a type of Cap Cost Reduction.
Back to TopGap Protection Insurance coverage to pay for future lease or loan payments in the event your vehicle is stolen or totaled in an accident.
Back to TopIndependent Leasing Company A financial organization that leases vehicles but is not affiliated with an automotive manufacturer or distributor. (See Captive Finance Company.)
Back to TopInitiation Fee (See Acquisition Fee.)
Back to TopLessee The person or company leasing the car from the dealership.
Back to TopLessor The company that leases the vehicle to the consumer.
Back to TopManufacturer's Suggested Retail Price (MSRP) Also known as "sticker price." MSRP is what the vehicle manufacturer determines is the value of the car at retail. In the majority of situations, the vehicle sells for less than the MSRP. However, it can sell for more than the MSRP if the vehicle is in particularly high demand.
Back to TopOpen-End Lease A lease where the consumer is liable for a shortfall between the vehicle's projected value (at lease inception) and its actual value (at lease end). (See Closed-End Lease.)
Back to TopPreparation Fee A fee charged by the dealer or lessor to cover the incurred cost of readying the vehicle for pickup. Also known as "prep fee."
Back to TopRent Charge A lease's equivalent to a regular auto loan's interest.
Back to TopResidual Value The estimated wholesale value of a leased vehicle at the end of the lease. It is used to determine your monthly payment.
Back to TopSingle-Payment Lease A lease where all payments are made in a lump sum, rather than on a monthly basis. Generally, the consumer pays less interest this way than with a conventional lease.
Back to TopTotal Contractual Obligation The sum of your down payment, trade-in, all monthly payments and any other fees, exclusive of deposits, taxes, and registration expenses.
Back to TopTrade-In Allowance The value assigned to the vehicle you use as a trade.
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