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major life purchases
| Question | Answer |
|---|---|
| acquisition fee | non-refundable, one-time charge imposed by leasing companies (for autos) or syndicators (for real estate) to cover administrative costs or to compensate for locating and closing on an asset |
| closed end lease | "walkaway lease," is a vehicle rental agreement where the lessee makes fixed monthly payments for a set term |
| collateral | an asset (such as a house, car, or cash) pledged by a borrower to a lender to secure a loan, acting as a guarantee of repayment |
| dealer incentives | cash rebates, special APR financing (e.g., 3.9% for 60 months), and, lease deals |
| default | the failure to fulfill a legal obligation, such as repaying a loan or appearing in court, or a pre-selected option in computing |
| deficiency | a shortage where liabilities, debts, or expenses exceed assets, income, or available cash. |
| depreciation fee | accounting method that allocates the cost of a tangible asset (like machinery, vehicles, or buildings) over its useful life |
| early termination | ending of a contract, lease, or agreement before its scheduled expiration date, often involving penalties, fees, or specific legal justifications |
| finance charge | total cost of borrowing money, including interest and fees, typically expressed as a percentage of the loan amount |
| fixed rate loan | financing option with an interest rate that remains constant throughout the entire loan term, providing consistent monthly payment |
| inception fees | upfront costs required to start a contract, most commonly in car leasing, which typically include the first month's payment, security deposit, acquisition fee, registration, and taxes |
| installment loan | a loan for a set amount of money repaid over a fixed period through scheduled, regular payments (usually monthly) that include principal and interest |
| invoice price | the amount a dealership is billed by the manufacturer for a vehicle, typically lower than the Manufacturer’s Suggested Retail Price (MSRP). |
| lease | contractual agreement where an owner (lessor) grants exclusive possession and use of an asset—such as real estate or a vehicle—to another party (lessee) for a specific period in exchange for rent |
| lessee | a person who holds the lease of a property; a tenant. |
| lessor | a person who leases or lets a property to another; a landlord. |
| mileage allowance | tax-free reimbursement paid by employers to employees for using their personal vehicles for business purposes |
| mileage charge | fee applied per mile for exceeding agreed-upon limits in a lease or rental contract, or a payment/reimbursement for vehicle travel expenses at a set rate per mile |
| money factor | decimal number used to calculate the financing interest on a car lease, representing the interest portion of monthly payments |
| MSRP (manufactures suggested retail price) | recommended selling price for a product, particularly vehicles, set by manufacturers to standardize prices across retailers |
| open end lease | vehicle lease where the lessee assumes the risk of the vehicle's depreciation, having no mileage limits but requiring payment for the difference between the projected and actual |
| purchase option | contractual clause giving a buyer or lessee the right, but not the obligation, to buy an asset (such as real estate, vehicles, or equipment) at a predetermined price within a specific timeframe |
| rebates | partial refunds paid after a purchase |
| residual value | the estimated worth of an asset—often a car or business equipment—at the end of its lease term or useful life |
| secured loan | type of credit backed by collateral—such as a home, car, or savings account—which lenders can seize if the borrower defaults |
| trade-in value | the amount a dealership offers for your current vehicle to be applied toward the purchase of a new one, functioning as a down payment |
| unsecured loan | type of credit that does not require collateral (such as a home or car) to borrow, relying instead on creditworthiness, income, and repayment history for approval |
| upside down | commonly known as having negative equity or being "underwater"—occurs when you owe more on a loan (such as for a car or home) than the asset is currently worth |
| variable rate loan | features an interest rate that fluctuates over time based on an underlying index (like the prime rate), causing monthly payments to rise or fall |
| warranty | legally binding guarantee from a manufacturer or seller promising to repair, replace, or refund a product if it fails or proves defective within a specified period |
Created by:
mazzarella26