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Major Life Purchases
| Question | Answer |
|---|---|
| Acquisition Fee | An upfront, non-negotiable costs charged to initiate a car lease or real estate deal. |
| Closed End Lease | A vehicle financing agreement with fixed monthly payments, set terms (usually 24–48 months), and predetermined mileage limits. |
| Collateral | An asset or property (such as a home, car, or cash) pledged by a borrower to a lender to secure a loan, reducing the lender's risk. |
| Dealer Incentives | Financial inducements from manufacturers to dealers |
| Default | The failure to meet the legal obligations of a loan or financial contract, primarily by missing scheduled debt repayments. |
| Deficiency | Represents a shortfall, typically the remaining balance owed to a lender after collateral (like a home or car) is sold for less than the debt amount, or in taxation, a discrepancy where a taxpayer owes more than they reported. |
| Depreciation Fee | An accounting method that systematically allocates the cost of a tangible asset over its useful life, reflecting its decreasing value due to wear, tear, or obsolescence. |
| Early Termination | Is the act of ending a contract, such as a lease, service agreement, or employment, before its designated end date. |
| Finance Charge | The total cost of borrowing money, expressed as a dollar amount, which includes interest and any additional fees imposed by a creditor. |
| Fixed Loan Rate | An interest rate that remains constant throughout the entire life of a loan, ensuring that the interest portion of payments and the total monthly payment amount do not change. |
| Inception Fees | Are the total upfront payments required to start a lease, typically including the first month's payment, down payment, security deposit, registration, and an administrative acquisition fee. |
| Installment Loan | A type of credit where a borrower receives a lump sum of money upfront and repays it over a set period (the loan term) through scheduled, regular payments—usually monthly. |
| Invoice Price | The amount a manufacturer charges a dealership for a new vehicle, essentially representing the dealer's cost before accounting for additional incentives, fees, or holdbacks. |
| Lease | A binding legal contract where a property owner (lessor) grants another party (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 right to use property (real estate, vehicles, or equipment) owned by another person or entity (the lessor) for a specific time in exchange for payments under a lease agreement. |
| Lessor | The owner of an asset—such as real estate, vehicles, or equipment—who grants temporary possession and use of that asset to another party, known as the lessee, through a legally binding lease agreement. |
| Mileage Allowance | A tax-exempt reimbursement paid to employees for using personal vehicles for business, calculated at a set rate per mile to cover fuel, maintenance, and depreciation. |
| Mileage Charge | A fee assessed based on the distance driven, typically calculated as a per-mile rate. |
| Money Factor | The financing rate used to calculate the interest portion of a monthly car lease payment. |
| MSRP | It is the price a manufacturer recommends retailers sell a product for, commonly used for automobiles, electronics, and appliances to standardize prices. |
| Open End Lease | A flexible rental agreement, often used for commercial vehicles, that has no mileage restrictions but requires the lessee to pay a "balloon payment" covering the difference. |
| Purchase Option | A contract granting a buyer the exclusive right, but not the obligation, to buy an asset (usually real estate) at a set price within a specific timeframe. |
| Rebates | A partial refund or return of money, typically provided after a purchase is made, acting as a post-sale incentive. |
| Residual Value | The estimated worth of an asset—such as a vehicle or equipment—at the end of its lease term or useful life. |
| Secured Loan | A type of credit backed by a borrower’s asset—such as a home, car, or savings account—which serves as collateral. |
| Trade-In Value | The amount a dealership offers for your current vehicle, which is then applied as a credit toward the purchase of a new or used car. |
| Unsecured Loan | A type of credit that does not require collateral (assets like a home or car) to secure the funds. |
| Upside Down | The outstanding balance of a loan (such as for a car or house) is higher than the current market value of that asset. |
| Variable Rate Loan | A type of financing where the interest rate fluctuates over the life of the loan based on an underlying benchmark or index, such as the prime rate. |
| Warrenty | A legally binding, written guarantee from a manufacturer or seller assuring the quality, condition, or performance of a product, promising repair or replacement if faults arise within a specified period. |
Created by:
Aconti28