Car Lease Contract – Important
Car leasing agreements, or contracts, are often not easy to understand. So let’s take a look at demystifying them.
Gross Capitalized Cost – the price of the leased vehicle plus any other costs that have been added to the lease to be financed
Capitalized Cost Reduction – any down payment, rebate, or trade vehicle credit that will be subtracted from Capitalized Cost
Net Capitalized Cost – Gross Capitalized Cost minus Capitalized Cost Reduction, the amount that will be financed in the lease
Residual Value – the predicted lease-end resale value of the vehicle that is used when calculating monthly payment
Acquisition Fee – an administrative fee charged by the lease finance company for originating the lease and handling the paperwork
Disposition Fee – a fee charged at lease-end when the vehicle is returned
Lease Term – the length of a lease, in months
Doc Fee – an administrative “documentation” fee charged by a dealer on all car sales and leases
Rent Charge – a disclosure of the total amount of finance charges that will have been paid by the end of the lease
Monthly Payment – the amount to be paid, in advance, each month for the car lease
Sales Tax – the amount to be added to each monthly payment that is sales tax required by the state and local government
Total Payment – Monthly Payment plus Sales Tax
Total of Payments – a disclosure of the total amount that will have been paid in payments by the end of the lease
Monthly Payment is calculated using an industry-standard leasing formula. You can calculate your own payments or check a dealer’s calculation using our Lease Calculator, which uses that same formula.
Lease contracts are not required to show the lease finance rate used to calculate your payments. It’s called Money Factor and is expressed as a very small number, such as .0009. It can be converted to an APR interest rate equivalent by multiplying by 2400. So a money factor of .0009 is equivalent to a 2.16% interest rate. You must ask your dealer what money factor was used in your contract.