Commonly Used Leasing Terms

Acquisition Fee
A fee charged by a leasing company (the "lessor") to cover the administrative costs of preparing, approving and administrating the lease. Acquisition fees may be paid up front or included in the gross capitalized cost.

Buy-Out
See "Residual Value" below.

Capitalized Cost
Often used to refer to the selling price of a vehicle to be leased. May be used to refer to the gross capitalized cost or the adjusted capitalized cost.

Capitalized-Cost Reduction
The total of any cash payment, trade-in allowance or rebate used to reduce the gross capitalized cost. The capitalized cost reduction is subtracted from the gross capitalized cost to get the depreciation.

Closed-end Lease
A type of lease in which the lessee has the right to return the vehicle at the end of lease without further obligation and regardless of any difference between the residual value and the realized value at the end of the lease. Closed-end leases typically have limits on the amount of mileage permitted and specify a per kilometer fee if the lessee exceeds the allowable mileage. Most manufacturers offer closed-end leases on their own products.

Depreciation
The amount the vehicle declines in value over the term of the lease or the difference between the capitalized cost and residual value.

Early Termination
Ending a lease before the scheduled termination date. The lessee will typically be required to pay an early termination charge as described in the lease agreement.

Equity
The difference between the residual value and the realized value at the end of the lease. The lessee may be entitled to a refund if the realized value is greater than the residual balance.

Excess Mileage Charge
The fee charged for each kilometre in excess of the predetermined mileage limit, as set forth in some lease agreements. The excess mileage charge varies depending on the type of vehicle.

Gross Capitalized Cost
The negotiated price of the vehicle, plus any other amounts you agree to include in the capitalized cost.

Lease Term
The period of time covered by the lease agreement.

Lessee
The party entitled to possession and use of the vehicle according to the terms of the lease.

Lessor
The legal owner of the property that is leased.

Money Down
See "Capitalized Cost Reduction" above.

MSRP
The manufacturer's suggested retail price of the vehicle.

Open-end Lease
A type of lease in which the lessee is responsible for the difference between the residual value and the realized value at the end of the lease. Open-ended leases typically do not have limits on the amount of mileage permitted because the lessee is ultimately responsible for the residual value. With open-end leases, the lessee may be entitled to a refund if the realized value is greater than the residual balance (commonly referred to as the lessee's "Equity").

Realized Value
A value assigned to the vehicle at lease termination. Check your lease agreement for a definition that may range from the value actually received by the lessor, the highest offer received by the lessor, the vehicle's "fair market value", the wholesale value or the retail value.

Residual Value
The lease-end value of the vehicle, established at the beginning of the lease. This value is used in determining the monthly lease payment. The residual value is also used to determine the depreciation and other amortized amounts that go into determining the monthly lease payment.

Security Deposit
A refundable deposit, usually equal to one monthly payment, collected by the lessor at the beginning of the lease to offset any amounts due under the term of the lease. The Security Deposit can often be waived on vehicles leased through Affinity Leasing Group, subject to credit.