Auto Leasing Glossary

October 15th, 2008 by Shenron

It is essential to educate yourself about everything there is to know about leasing a vehicle before signing with any auto lease companies. Read as much articles as you can and gather opinions and comments from different people. Another vital task before signing a lease is to know the terms and conditions as well as the charges that would be applied to your lease contract. Leasing have a few charges that you would be subjected to pay at the beginning and at the end of your lease contract.

The inception fees are charges made at the beginning of the lease contract. This includes acquisition fees, license and registration fees, taxes, security deposit, and the first monthly payment. The acquisition fees are also known as administration fees. Most acquisition fees cost about three hundred dollars or more and are not negotiable. However, not all auto lease company dealers charge an acquisition fee. Security deposits made by leasers are refundable at the end of the lease contract. Security deposits are intended to be a safety net in the event that the lease contract holder is unable to pay and can be used to pay off other excess charges like penalty fees.

Capitalized costs are also important to take note of. Capitalized costs are similar to inception fee that includes license fees, acquisition fees, taxes, and other insurance or warranties that you would like to avail.

One of the factors the influence your monthly dues is the depreciation fee. The depreciation fee is the value lost of the vehicle at the end of your lease contract. To help you determine the depreciation fee of your lease contract, subtract the estimated residual value from the sticker price and divide it by the duration of your lease contract. The residual value would be the amount of the vehicle at the end of your lease contract. Remember, the higher the residual value the lower your monthly dues are. However, having a higher residual value is beneficial for those who intend to purchase the vehicle at the end of their lease contract.

Another important thing to consider when you lease a vehicle is the mileage allowance. The mileage limit set by most auto lease companies are approximately 12,000 to 15,000 miles. However, the mileage allowance can always be negotiated to fit your lifestyle. Also, negotiate with your dealer about the penalty charges for extra miles. Most auto lease dealers charge ten or twenty cents per extra mile. Although this may not seem too much to be concerned with, mileage penalties can easily add up. Other fees to consider when leasing a vehicle are the wear-and-tear charges, and money factor.

Lastly, termination fees or disposition fees are important to take into account before signing any lease. When you decide to end your lease contract earlier than expected, the termination fee or disposition fee may cause you a hefty amount of cash to put out. It would be wise to always read the print about every fee you are subjected to pay before signing.

Share This!