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Major Purchases
| Term | Definition |
|---|---|
| Acquisition Fee | a non-negotiable, one-time charge in car leasing or real estate used to cover administrative costs, underwriting, and deal structuring. |
| Closed End Lease | often called a "walkaway" lease, is a vehicle rental agreement where the lessee returns the car at the end of the term with no obligation to purchase it or pay for differences in estimated depreciation |
| Collateral | an item of value, such as property or assets, that is pledged by an individual (borrower) in order to guaranty a loan |
| Dealer Incentives | manufacturer-to-dealer bonuses used to boost sales of specific models, often favoring older inventory |
| Default | to fail to do something, such as pay a debt, that you legally have to do |
| Deficiency | the quality or state of being defective or of lacking some necessary quality or element |
| Depreciation Fee | the systematic allocation of a tangible asset’s cost over its useful life, representing how much of an asset's value has been used. |
| Early Termination | a contractual provision allowing parties to end an agreement before its scheduled expiration date, often requiring notice, specific conditions, or penalty fees. |
| Finance Charge | the total cost of borrowing, including interest and fees (like origination, annual, or late fees) paid to a creditor. |
| Fixed Rate Loan | a financing option with an interest rate that remains locked for the entire term, providing predictable, consistent monthly payments |
| Inception Fee | payments that must be made at the beginning of the lease |
| Installment Loan | a borrowing arrangement where a lump sum is provided upfront and repaid over a set period through scheduled, fixed monthly payments (principal plus interest). |
| Invoice Price | the amount the manufacturer charges the dealer for a vehicle |
| Lease | a legally binding contract where an owner (lessor) grants a user (lessee) the right to use property—such as real estate, vehicles, or equipment—for a specific period in exchange for regular payments |
| Lessee | a person or entity who acquires the temporary right to use another party's (lessor's) property, equipment, or assets through a lease agreement, usually in exchange for periodic payments |
| Lessor | the owner of an asset (real estate, vehicle, or equipment) who grants a lease to another party, the lessee, allowing them to use the property in exchange for regular payments |
| Mileage Allowance | a set, per-mile reimbursement or tax deduction for using a personal vehicle for business, charitable, medical, or moving purposes. It covers fuel, maintenance, and depreciation, commonly based on IRS standard rates |
| Mileage Charge | —$0.70 per mile for business in 2025 |
| Money Factor | the interest rate on a car lease, expressed as a small decimal (e.g., 0.00125) rather than a percentage. |
| MSRP | the price a manufacturer recommends dealers charge for a vehicle |
| Open End Lease | a vehicle leasing agreement, typically used for business fleets, where the lessee is responsible for the difference between the car's estimated residual value and its actual market value at the end of the term |
| Purchase Option | a legal contract giving a potential buyer the exclusive right to purchase an asset—most commonly real estate or company stock—at a set price within a specific timeframe, without the obligation to do so. |
| Rebates | partial refunds paid after a purchase |
| Residual Value | the estimated worth of a fixed asset at the end of its lease term or useful life |
| Secured Loan | a type of financing backed by collateral—an asset like a home, car, or savings account—that the lender can repossess if payments are not made |
| Trade-In Value | the amount a dealership offers you for your current vehicle to apply toward the purchase of a new one, reducing the net price |
| Unsecured Loan | a type of credit not backed by collateral (assets like a home or car), relying instead on the borrower's creditworthiness. |
| Upside Down | you owe more on the vehicle than its current market value |
| Variable Rate Loan | a financing option with an interest rate that fluctuates over time, tied to a benchmark index like the prime rate |
| Warranty | a legally binding contract (usually written) promising that a manufacturer or seller will repair or replace a product if it fails or proves defective within a specified period |
Created by:
zwestbrook27
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