Closing a Car Lease Deal – Lease Contract

car lease contract sign and driveThe final stage of a car lease deal is the signing of your contract.  It’s important to understand what’s in the contract and that all the information in it is correct before you actually sign.

Since lease contracts are a bit difficult to comprehend, we’ll point out some of the key things you should look for in order to make sure it’s all right and that it agrees with what you believe to be the correct details.

It’s easy for dealers to make “mistakes” and miscalculations. It may be too late to get errors corrected after you sign.


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.