Car Lease Glossary

This is a list of commonly used car leasing terms and definitions.  Click on each car lease term to get a more in depth explanation.  If you don’t see a term in this list that should be included or you see revisions that need to be made, please contact Auto Lease Help and give me your suggestions.

A

Acquisition Fee – also known as a “bank fee”.  This fee is included in all car leases, but dealers will usually not reveal this number unless you specifically ask for it.  If you are using a car lease calculator to confirm the monthly payments, don’t forget about this fee.  This fee is nearly impossible to negotiate.

B

Bank Fee – also known as an acquisition fee.  See “acquisition fee”

C

D

Depreciation – this term refers to the predicted value that the car will have at the end of the car lease agreement.     The depreciation goes hand in hand with the residual value of the car.

E

F

G

H

I

L

(Car) Lessee – the party that pays for use of the vehicle

(Car) Lessor – the party that receives payments in exchange for the use of the vehicle

M

Money Factor – the car lease money factor is equivalent to the interest rate.  The money factor is provided in various ways to, in some cases, deceive the lessee.  The most common way that the money factor is given is 0.00xxx.  In order to find out your interest rate, multiple the money factor by 2400.  Example:  money factor is 0.0005 x 2400 = 1.2% interest rate.

Multiple Security Deposits (MSD) – multiple security deposits or MSD is not well known by lessees let alone dealers.  This may or may not be offered by all dealers and leasing companies, but it is a way to put down multiple security deposits equal to the monthly payment (sometimes rounded up to the closest $50)  in order to lower the interest rate (money factor) on your lease.  This is an option for those with less than excellent credit (<700 FICO score).  In my years of working with dealers for car leasing, I’ve had a dealer ever mention MSD as an option.

N

O

P

R

Residual Value – this refers to the predicted value of your car at the end of the lease agreement.  The residual value is one of the key calculations in determining your monthly payment.  Residual value is expressed as a percentage of MSRP and is provided by the dealer.  Never have I encountered a dealer who provided me with a residual value differing from what was expected.

S

Security Deposit – security deposits for leasing a car is uncommon unlike putting down a security deposit for leasing an apartment.   If your credit is less than excellent (<700 FICO score), you may be required to put down a security deposit equal to one month’s car payment.   As with any security deposits, this is refundable.   Also see  ”multiple security deposit (MSD)“.

W

Wear and Tear – you’ll begin hearing this term near the end of your lease and refers to the lease return in which lease companies will inspect your car for scratches, dents, damages to the interior, etc.