Jargon Buster

Saturday, December 10, 2005

Terms to Know Before Leasing A Vehicle - Leasing Jargon Simplified

Terms to Know Before Leasing A Vehicle - Leasing Jargon Simplified
By Bill Bolton

So, you’ve decided that you want to lease that next vehicle. Can’t really blame you. With today’s incentives, rebates, and favourable lease rates why wouldn’t you. Not only do you get to drive a new car, but a new car that you wouldn’t otherwise be able to afford if you were to purchase and finance it. Buyer beware though. With leasing comes new and sometimes rather confusing vocabulary. Don’t get lost in a sea of leasing jargon. Protect yourself. Learn and understand the industry language. For those seriously thinking of leasing that next vehicle, here is a useful glossary of “new” terminology that you should familiarize yourself with BEFORE you negotiate a lease:

Acquisition Fee: An administrative charge levied by the leasing company for processing a lease. This fee is typically NOT negotiable and can have a significant bearing on the overall cost of the lease.

Base Interest Rate: This is the cost of leasing and using a vehicle and is measured by the interest paid over the lease term.

Buy at end-of-term interest rate: This is the net interest rate for the lease if the lessee, at the end of the lease term, purchases the vehicle at the end-of-lease purchase price.

Capitalized Cost: This is the total purchase price of the vehicle. The price includes the cost of all extras such as vehicle options, extended warranties, life insurance, and rustproofing. The capitalized cost equals the amount you would pay for the vehicle if the vehicle were being purchased.

Capitalized Cost Reduction: A capital cost reduction is a down payment, in the form of cash or trade-in, that is applied to the final purchase price of the vehicle reducing the monthly lease payment.

Closed End Lease: Leases in which the lessee’s financial obligation rests only with the negotiated monthly lease payment. Since the residual value of the vehicle is stated in the lease contract, the lessee is not financially responsible if the actual value of the vehicle is less than the stated residual value. The lessee need only return the vehicle at the end of the lease term with no further obligation.

Dealer Participation: A rebate or discount, contributed by the dealer, reducing the final purchase price of the vehicle.

Depreciation: The decrease in value of a vehicle over time. Depreciation in automobile leasing is the difference in value between the cost of a new vehicle and the value of the vehicle at the end of the lease term.

Disposition Fee: A fee charged by the lessor at the end of a lease to ready the car for sale. The lessor may apply this fee against the deposit made by the lessee at the beginning of the lease term.

Down Payment: A sum of money paid at the beginning of a lease contract, usually at the time of signing, that is applied to the final purchase price. In leasing, the down payment is referred to as the capitalized cost reduction. Typically, the larger the down payment, the smaller the lease payment.

Early Termination Fee: A penalty paid by the lessee for terminating a lease contract early. A lessee pays for the depreciation of a vehicle in equal monthly payments. Since a vehicle’s depreciation is highest in the first months of a lease, terminating a lease early results in the lessee using more of the vehicle’s value than what they’ve paid for subjecting the lessee to penalty.

End-of-Lease Purchase Price: Also known as the residual value. This is the price at which the lessee may purchase the vehicle at the end of the lease term.

Excess Wear & Tear: Wear and tear beyond what is deemed acceptable by the leasing company. It is the responsibility of the lessee to take reasonable care of the car and to ensure it is returned at the end of the lease term in good condition. Bald tires, body dents, and engine trouble due to neglect could subject the lessee to repair and replacement charges.

Gap Insurance: The name given to a type of insurance coverage that covers the difference between the actual cash value of the leased vehicle and what is still owed on the lease contract. If a leased vehicle is destroyed in an accident or stolen, gap insurance coverage protects the lessee against additional losses due to “gaps “ between the insurance settlement and the lessee’s financial obligations set out in the lease contract.

Independent Lessor: These are non-traditional lessors, usually an individual business, that can structure and write a lease for most makes and models of vehicles. The terms and conditions of the lease agreement can be customized to accommodate different lease and mileage conditions.

Lease Extension: This is the continuation of a lease, beyond the original lease contract. Payments are continued on a month-by-month basis at the same sum negotiated at the beginning of the lease term.

Lease Term: This is the length of the lease contract. Most vehicles can be leased for 12, 24, 36, 48, and 60 month lease terms. The monthly payment of a lease will vary depending on the length of the lease term.

Lessee: Name assigned to a person or party who signs a lease and agrees to assume responsibility for a vehicle and the lease payments.

Lessor: Name assigned to a person or party that owns the vehicle and agrees to lease it to the lessee.

Mileage Allowance: Lease agreements establish a maximum mileage allowance that the car may be driven over the life of the lease. The agreement will also specify the cost per mile or kilometer the car is driven over and above the allowance that is due and payable at the end of the lease term.

Money Factor: This is a number used to calculate the base interest rate of a lease. To arrive at a base interest rate, leasing companies will multiply a money factor by 2400. The money factor of a lease is known by the leasing and sales consultant at the dealership and is used to calculate the cost of money in the same fashion as an interest rate does. The lower the money factor, the lower the monthly lease payments.

Monthly Payment: A payment made on a specified date each and every month as specified in the lease contract. Monthly lease payments calculated on a lease contract typically include all applicable taxes.

Net Interest Rate: This is the total interest rate for a lease and represents the true cost of the lease. The lower the net interest rate, the lower the cost of the lease.

Open-End Lease: Leases in which the lessee’s financial obligation may exceed the negotiated monthly lease payment. In an open-end lease the residual value is set at the beginning of the lease term. The lessee is financially responsible if the actual value of the vehicle is less than the stated residual value.

Purchase Option: Option extended to the lessee, at the end of a lease contract, to purchase the vehicle at the pre-determined purchase price. The pre-determined purchase price is normally the stated residual value in the lease contract.

Residual Penalty: This is the penalty a lessee pays if the end-of-lease purchase price is greater than the expected value of the vehicle at the end of the lease term.

Residual Value: This is the expected or pre-determined value of a leased vehicle at the end of the lease contract. The stated residual value on a lease contract is normally the buyout price at the end of a lease term. The residual value also determines whether the lessee should purchase the vehicle at the end of the lease term. If the residual value is less than the actual market value it would be advantageous for the lessee to buy the vehicle and sell it to a third party.

Security Deposit: This is a sum of money, paid up front, as security for excess wear and tear on the leased vehicle. The amount is refunded if the vehicle is returned in good condition. In some cases, the deposit may be applied against the final monthly payment.

Good luck and happy negotiating!

William Bolton is founder, owner, and operator of Leasedwheels.com, a website specializing in auto lease transfers and assumptions. If you're stuck in a lease you need out of or wish to take over an existing lease on a short-term basis with no money down, visit: http://www.leasedwheels.com

Wireless Jargon / Glossary

Wireless Jargon / Glossary
By Jason Keno

Wireless networking, like so many things in life -- and especially the ones that have anything to do with computers -- is filled with jargon. Hi-tech babble baffles many Don't be intimidated, though: here's a quick computer-speak to English guide to help you out.

802.11. The name of the wireless networking standard, set by the IEEE. Ensures that wireless devices are interoperable.

Driver. A piece of computer software that tells the computer how to talk to devices that are plugged into it. For wireless networking, the drivers you need to install will come on a CD with any equipment you buy.

Ethernet. The most common way of connecting to a LAN. Any wires you might have connecting your computers together now are Ethernet wires, and the cable connecting your modem to your computer is probably an Ethernet wire too.

Ghz. Gigahertz. A measurement of frequency -- one gigahertz is one billion cycles per second. You may recognise the measurement from computer processor speeds, which are now also measured in Ghz.

IEEE. The Institute of Electrical and Electronics Engineers. In charge of the wireless networking standard, as well as many other computer-related standards (including the Ethernet standard). They ensure that computer equipment made by different manufacturers can work together.

Interoperable. Means that two pieces of equipment are compatible -- you can use them together, because they stick to the standards. You should not get any wireless equipment that isn't interoperable.

LAN. Local Area Network. A network that is generally confined to one building, such as a home or office. A wireless LAN is also known as a WLAN.

Linux. An alternative operating system to Windows. Computers running Linux can run many programs and connect to the Internet without needing Windows. Linux is free to download and you are allowed to give it to friends to use. A lot of wireless devices run Linux, or are compatible with it.

MAN. Metropolitan Area Network. A network that covers a larger area, for example a town or city. Wireless MANs (men?) spread Internet access all over the area, but are expensive to set up. They are sometimes used on university campuses.

Mbps. Megabits per second, a measurement of connection speed. Not to be confused with MBps, megabytes per second. There are eight megabits in a megabyte.

PAN. Personal Area Network. These are networks made up of devices connected together in one small area. For example, your computer with a USB keyboard and mouse connected is a PAN. PANs can be wireless, using a technology called Bluetooth.

PCI. Peripheral Component Interconnect. This is a way of installing new devices inside your computer, such as graphics cards and network devices. If you want to install a wireless card inside your computer, you will be using PCI.

PCMCIA. Personal Computer Memory Card International Association (some say it should stand for 'People Can't Memorise Computer Industry Acronyms'). A standard for plugging credit card-sized devices into a laptop, to give it extra capabilities. PCMCIA is a great way of adding wireless networking to your laptop as easily as inserting a disk.

USB. Universal Serial Bus. A port used for connecting all sorts of devices to a computer, including keyboards, mice, printers, external drives, and almost anything else you can think of. If you don't want to open up your computer and you don't have a laptop, you can get a USB wireless device.

WAN. Wide Area Network. A network that is connected over more than one physical site, such as a business that has its computers in two countries connected on one network. The Internet, for example, is a WAN -- the biggest WAN in the world.

WEP. Wired Equivalent Privacy. The old standard for encrypting wireless networks. Unfortunately, it was found to be insecure back in 2001, and so should no longer be used.

WPA. Wi-Fi Protected Access. Basically an upgrade of WEP to fix its security problems. WPA-encrypted networks change their encryption method often, to avoid becoming vulnerable, and also shut down for thirty seconds if they detect a suspected attack.

Written by Jason Keno of DetectiveAgents.com

Private Investigation and PC Security Software.