Today, owning a car isn’t a luxury; it’s a liability. Loans and taxes fade the charms of a new car. As soon as the installments of the car come to an end, the attraction, along with the worth of the car, disappears too. Instead of a car loan, leasing a car is a subtle option of maintaining the swag of driving a new, better, and lavish car.

So, thanks to the facility like auto leasing, a luxury car isn’t at a distance from your reach now. There are so many ways to buy a lease, but taking over a lease from a lease seller is the most affordable and a win-win way for both parties to enjoy driving the car of dreams.

Car leasing has made driving the Electric Vehicles, Hybrids, SUVs, Sedans, Convertibles, and other luxury calls affordable and available. For many reasons, people want to terminate their lease. You may take advantage of their excuses and grab the beauty.

Leasing a car isn’t a big deal, but it is technical. It needs the attention of the lessee to master the art of cracking the best cost-efficient deal. To give you more insights into the auto lease process, we’ve compiled a glossary of the 55 essential terms to know industry jargon.

Learn to negotiate a lease deal like a pro by the end of this article. Here you go:

  1. Acquisition Fee              

It is a fee charged by some leasing companies for originating the loan. This fee often rolls into the capitalized cost when calculating monthly payments.

  • Amortization

It is the method of retiring a standard auto loan. A steady stream of constant payments pays down the loan principal and interest.

  • Auto Insurance

Auto insurance is a contract between the buyer or lessee, and the insurance company that covers the financial loss in the event of a car accident or theft. In exchange for a premium, the insurance company covers car loss or damages.

  • Autolease

An auto lease is a financial arrangement that lets a person rent a car, truck, SUV, or motorcycle for some time. At the end of the lease, the lessee has the option to return the vehicle or buy the car.

  • Automotive Leasing Guide       

Also known as the blue book, it is a guide to explain the difference between a good and a bad lease deal. This involves doing research and finding a deal that works for you.

  • Auto loan           

An auto loan is a loan that a person takes to purchase an automobile. Auto loans are structured as installment loans and are secured by the value of the vehicle being purchased.

  • Balloon Payment Loan

It is a type of loan in which a consumer agrees to pay a large, predetermined amount at the end of the term.

  • Base Monthly Payment

The monthly lease payment is the amount excluding taxes and charges. It comprises of total lease term depreciation and total lease term rent charge.

  • Beacon Score   

The Beacon Score or a credit score provides lenders with insight on an individual’s creditworthiness.

  1. Blue Book Price

Dealers use to estimate wholesale and retail vehicle pricing with the reference of the Blue Book. In common parlance, the blue book price refers to a price looked up in one of the many guides to pricing.

  1. Capitalized Cost             

It is a leasing term that refers to the price of the car. The lower the capitalized cost, the lower the monthly lease payment. The cap cost is negotiable and can be reduced in several ways.

  1. Car Dealership

A car dealership or vehicle local distribution is a business that sells new or used cars at the retail level. It employs automobile salespeople to sell their automotive vehicles.

  1. Closed-End Lease          

It is the most common type of car lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs such as the disposition fee, and the lease agreement is over.

  1. Co-Lessee         

An individual who signs the lease along with the prime lessee or company and is responsible for compliance with the lease terms in the event the lessee does not fulfill his or her obligations.

  1. Collision Coverage

Collision insurance is a type of insurance coverage for repair or replacement of a car if it’s damaged. If you’re leasing or financing your car, collision coverage is typically required by the lender.

  1. Comprehensive Coverage

Comprehensive insurance covers damages to your car caused by events such as vandalism, glass and windshield damage, fire, accidents with animals, acts of nature, etc.

  1. Consumer Leasing Act 

It is a federal law that spells out the requirements for disclosure of leasing costs and terms.

  1. Deal Negotiation           

It refers to negotiating the price of the car for a car lease. The lower you negotiate the price, the less depreciation you may have to pay for over the life of the lease if all other terms remain the same.

  1. Dealer Hold-back

These are the charges for extra services or products sold by the dealer, including rust-proofing, undercoating, and extended warranties. Hold-back allows the dealer to pay the manufacturer less than the invoice price. A buyer could obtain a car below invoice price, and the dealer would still make a profit.

  • Depreciation   

It is the asset’s decline in value throughout its useful life. Autos depreciate steeply in their first few years. In an auto lease, a charge for depreciation is the chief part of a consumer’s monthly payment.

  • Disclosure Statement  

A disclosure statement is an official document that outlines the terms, conditions, risks, and rules of a car lease. Lease contracts are required by Federal Law to include Federal Consumer Leasing Act Disclosures.

  • Disposition Fee              

It is a fee charged by some lessors at the end of a lease.

  • Down Payment

It is a payment in cash or trade-in value that reduces the amount of a car’s purchase price that is financed.

  • Early Termination          

The termination of a lease before its maturity is called early termination, which incurs a penalty for turning in the car before the term of the lease is over.

  • Extended Warranties  

Extended Warranty or a service contract is a contract that covers certain car repairs or problems after the manufacturer’s or dealer’s warranty expires.

  • Finance Fee     

It is the cost a lessee pay to the leasing company for the use of the money that purchased the car.

  • Gap Insurance 

It is a type of insurance offered to auto lease customers. It pays the difference between what a lessee owns and what the vehicle is worth in case the car is stolen or destroyed.

  • Lease Assumption         

It refers to an outside party taking over a lease from the original lessee under the terms and conditions outlined in the original contract.

  • Lease Buyout   

The term “lease buyout” refers to an agreement where an existing auto lease is given up and is opted by the other party from where the lease deal is left.

  • Lease Deal        

It is also called a lease swap. It is the lease transfer agreement between lessee and lessor.

  • Lease-End Buyout         

This is the originally contracted amount that the lessee can purchase the leased vehicle for at scheduled lease termination. This figure consists of the Residual Value plus the Purchase Option Fee if applicable.

  • Lease Takeover

Taking over an auto lease by a lessor from where the lessee has left the lease deal, also known as Lease Transfer or Lease swap.

  • Lease Termination        

Terminating a lease before its term ends is called Lease Termination.

  • Lease Termination Penalty       

Often auto leasing companies slap the lessee with charges as a penalty of ending the lease deal before time.

  • Lease-end         

Ending a lease with the end of the term is called Lease-end.

  • Leasing Company          

The car dealer sells the car to the leasing company. The leasing company will lease the car with its financing based on the price negotiated with the dealer.

  • Leasing Wear and Tear

These are the potential additional charges in case the vehicle is damaged or has to wear beyond what is normally expected for the lease term.

  • Lessee

Lessee is the primary driver of the vehicle who signs the lease and is responsible for compliance with the terms and conditions of the contract set forth. The lessee can be an individual or company.

  • Lessor 

The owner of the leased vehicle and the entity who sets forth the lease terms and conditions is the lessor. Typically, the lessor is a bank or vehicle manufacturer’s financial subsidiary.

  • Manufacturer’s Lease  

Car manufacturers own automotive finance divisions to help finance the sale of their products. Because the automotive company is making money on the sale of the vehicle itself, it can usually create better incentives than an independent leasing company.

  • Mileage Allowance      

It is the number of miles specified in a lease that a car may be driven over the life of the lease. Lessee must pay the extra charges if the car is driven over the lease’s mileage allowance.

  • Money Factor  

It is also a leasing term that expresses the cost of borrowing. It is similar to the interest rate paid on a conventional car loan, but it is expressed as a difficult-to-understand fraction. To convert the money factor to a recognizable interest rate, multiply it by 24.

  • MSRP  

MSRP stands for Manufacturer’s Suggested Retail Price. It represents the manufacturer’s recommended selling price for a vehicle and each of its options.

  • Open-End Lease             

It is another type of lease. It usually offers lower payments, but carries a risk for the consumer. Under an open-end lease, the lessee must pay any difference between the residual value of the car as stated in the lease, and the fair market value of the car, if lower, at the end of the lease.

  • Over Mileage Fee         

If a lessee exceeds the allotted mileage, then at the end of the lease, he/she will have to pay an excess mileage fee.

  • Rebate

It is a manufacturer’s reduction on the price of the car as an incentive to buyers. Rebates appeal to people with no credit or less-than-perfect credit who cannot qualify for the lowest-rate loan. A rebate may also appeal to first-time buyers who don’t have a lot of cash for a down payment or another car to trade-in.

  • Residual value

The original estimate of the wholesale value of the leased vehicle at scheduled lease maturity is called the residual value. This value will vary depending on miles contracted in lease.

  • Security Deposit            

A security deposit or reconditioning reserve is an amount, often the same as one month’s payment, the dealer holds to be sure that the car will be returned in good condition.

  • Subprime Borrower      

When you have a credit score below 619, you are considered a subprime borrower and will have to pay much higher interest rates.

  • Term   

It is usually the 24, 36, 48, or 60 months length of the loan or lease.

  • Trade-in-value

It is the amount that the dealership will credit you for the vehicle you provide as partial or full payment for another vehicle. The amount credited is frequently about 5 percent below the wholesale value of the vehicle.

  • Vehicle Add-ons            

It is also known as auto options. These are features added on to the car often by the dealer such as a CD stereo, anti-theft system, detailing, and undercoating.

  • Vehicle Inspection        

Vehicle inspection is a procedure mandated by national or subnational governments in many countries in which a vehicle is inspected to ensure that it conforms to regulations governing safety, emissions, or both.

  • Vehicle Identification Number (VIN)   

It is a number assigned to the vehicle by the manufacturer. Each number is unique and appears on the vehicle’s registration and title.

  • Up-Front Costs

These are the costs that must be paid at the time of signing a car lease agreement. These can include the first month’s payment, a refundable security deposit, a capitalized cost reduction or down payment, taxes, registration, and other fees.