Leasing was originally intended to help businesses who wanted to own vehicles but at the same time wanted to avoid the high costs and maintenance. It's important to understand the terms in leasing so that you don't get lost in all the jargon of lease contracts and negotiations. Here are a few basic terms:
The consumer.
The company that is leasing the vehicle out; usually this is the bank or some other finance company.
This is the value of a car at the end of a lease and is usually estimated at lease start. This is also known as the lease-end value and is a percentage of the MSRP (Manufacturers Suggested Retail Price). If the residual value is higher, then your monthly payments are likely to be low. This is also a negotiable figure in a lease deal. Dealers will refer to the Automotive Leasing Guide to determine the value but be informed that some financial institutions will usually have their own guides as well.
This is an amount paid by the consumer or lessee that includes the principal, interest and profit.
Money Factor:
a.k.a the lease rate, it is the interest rate built into all leases. This is the leasing version of the rate of interest that is charged to those who buy using credit. This is something that is known usually only to the leasing company and dealer.
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