Leasing a car? Understand the leasing lingo and sound like you have a clue

Snow that dealer. Learn how to sound like you have a clue.

“If you think lawyers have cornered the market on a language of their own, go lease a car,” writes Michael Kranitz in Look Before You Lease.

How to understand what dealers are really intending to deliver:

APR: Annual Percentage Rate. A term codified by federal consumer protection legislation. In simplest terms, it means the interest rate for one year charged on the unpaid balance of a loan. The term APR should not be used within the context of a lease, although it often is, improperly.

Closed-End Lease: A lease which allows the lessee to return the vehicle at the end of the lease term with no additional liability for the shortfall between the actual value of the vehicle at lease end and the projected residual value as stated in the lease. In a closed-end lease, the dealer essentially guarantees the future value of the vehicle.

Depreciation: A vehicle’s decline in value over the term of the lease.

Disposition Fee: A fee charged by most dealers to cover the expense of preparing and reselling or auctioning a leased vehicle at the end of the lease.

Gap Protection: Insurance which is purchased to supplement conventional vehicle insurance. Gap protection (or gap insurance) covers your termination liability under the lease (future payments, fees) if the vehicle is totaled or stolen before the end of the lease.

Money Factor: A small fraction which is used to calculate average monthly rent charges. When multiplied by 2400, the money factor approximates the equivalent APR of interest being charged on a lease.

Open-End Lease: A lease which requires the lessee to make up any shortfall between the actual value of the vehicle at lease end and the projected residual value stated in the lease. In an open-end lease, the lessee essentially guarantees the future value of the vehicle at lease end.

Residual Value: The estimated value of a leased vehicle at the end of a lease term.

Subvented Lease: A lease which is subsidized, usually by the manufacturer’s affiliated finance company.

AskStudent.com Chief Editor Xer0 has a car, but never drives it. Maybe you can borrow his.

Image Courtesy: schwartzbooks.com

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