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Major Purchases
| Term | Definition |
|---|---|
| Acquisition Fee | A fee charged by a leasing company (lessor) to set up a new lease, covering administrative costs like credit reports, insurance verification, and paperwork |
| Closed End Lease | The most common type of consumer lease, often called a "walkaway" lease |
| Collateral | An asset, typically the vehicle itself, that a borrower pledges to secure a loan |
| Dealer Incentives | Programs, discounts, or cash incentives offered by manufacturers to dealers to help sell specific vehicle models |
| Default | The failure to make timely payments or meet the terms of a loan or lease agreement |
| Deficiency | The remaining balance owed to a lender if a repossessed vehicle is sold for less than the amount required to pay off the loan or lease |
| Depreciation Fee | The component of a monthly lease payment that covers the decrease in the vehicle's value over the course of the lease term |
| Early Termination | The end of a lease contract before the scheduled maturity date. This typically results in significant penalties and fees |
| Finance Charge | The total cost of credit, including interest and other fees, for a loan or lease |
| Fixed Rate Loan | A loan with an interest rate that remains the same for the entire life of the loan |
| Inception Fees | The total fees due when starting a lease, including the acquisition fee, first month's payment, security deposit, and taxes |
| Installment Loan | A loan that is repaid over time with a set number of scheduled payments |
| Invoice Price | The price the dealer paid the manufacturer for the vehicle |
| Lease | A contract that allows a person (lessee) to use a vehicle for a specific period of time (term) in exchange for monthly payments, with a set residual value at the end |
| Lessee | The person or entity who leases the vehicle and makes the monthly payments |
| Lessor | The company or bank that owns the vehicle and allows the lessee to use it |
| The maximum number of miles allowed over the lease term without incurring extra charges (10,000–15,000 per year) | |
| Mileage Charge | The fee per mile charged if the vehicle is returned over the contracted mileage allowance |
| Money Factor | A number representing the interest rate on a lease |
| MSRP | The sticker price recommended by the manufacturer |
| Open End Lease | A type of lease where the lessee is responsible for the difference if the vehicle's actual value at the end of the term is less than the projected residual value |
| Purchase Option | A clause in a lease agreement giving the lessee the right to buy the vehicle at the end of the lease, usually for a pre-determined residual value |
| Rebates | Cash-back incentives offered by manufacturers to reduce the cost of a vehicle |
| Residual Value | The estimated value of the vehicle at the end of the lease term, determined at the beginning of the lease |
| Secured Loan | A loan that is backed by collateral, which makes it less risky for the lender |
| Trade-In Value | The amount a dealer is willing to pay for a customer's old car, which can be used to reduce the cost of the new vehicle |
| Unsecured Loan | A loan that is not backed by collateral, often resulting in higher interest rates |
| Upside Down | A situation where a borrower owes more on a car loan than the car is currently worth |
| Variable Rate Loan | A loan with an interest rate that can change over time based on market conditions |
| Warranty | A guarantee from the manufacturer that covers certain repairs for a specified period or mileage |
Created by:
etampubolon260