Leasing Terms Explained - Part 2
Credit Union Loan Rate
Based on published rates for new car loans with 20 percent down and 48 month
terms, this is calculated as the average loan rate for the month. Rates
available in any market may differ substantially from this average and this
average is only intended as a guide.
Dealer Participation
This is the amount contributed by the dealer to reduce the final purchase price
in the lease contract. Dealer participation can take the form of a rebate or
simply a discount. The dealer participation is reflected in the lease contract
as a capital cost reduction .
Deposit Rate Penalty
This measures the impact on the interest rate of any cash deposit that is
usually made at lease inception. Even though you get the deposit back, you lose
any interest that your deposit could earn for the duration of the lease.
Depreciation
The amount by which property loses its value. In automobile leasing,
depreciation is the difference between the new car cost and the value of the car
at the end of the lease.
Disposition Fee
This is a fee you pay at the end of the lease, to the lessor, which covers the
lessor's cost of getting the vehicle ready for sale after you have returned the
vehicle. It is often applied against any deposit you made at lease inception.
Disposition Rate Penalty
This measures the impact on the net interest rate of any disposition fee that
must be made at lease termination.
"Down" Payment
See Capital Cost Reduction
Early Termination
A vehicle's depreciation is highest in the first few months after it leaves the
dealer's lot. Since a lessee pays for depreciation in equal monthly payments,
lessees who end a lease early have almost always used up more of a car's value
than they've paid for.
Therefore, lease contracts generally include penalties for early termination. Be
aware of these penalties before you sign the lease contract and consider your
ability to fulfill the contract.
End of Lease Purchase Price
If there is a purchase option in the lease contract or agreement, this will be
the agreed upon price for the purchase of the vehicle at the end of the
lease-the stated residual value. This price may also include additional fees.
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Part 1
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