Lease terminology is to make you understand the terms of the lease. Here is the terminology you need to know:
Capital cost reduction means down payment. Favorable leases in which the customer is intended to purchase the car at the end of the lease.
Capitalized cost is the MSRP(manufacturer’s suggested a retail price and it may vary according to negotiations.
The factor is the rate of interest. The number has to be multiplied by 2.4 to get an APR. Lease interest rates range from 2-3 times more than traditional car loans.
Value is the estimated cost of the car at the end of the lease agreement. In a lease, the down payment is given in the form of pre-payment.
- No Down payment required:
The only benefit of leasing a car is you don’t have to give down payments. In leasing depreciation risk shifts from customer to the manufacturer. As in the case of down payment the risk moves from customer to manufacturer.