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Auto Lease Agreement
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The stated purpose of Regulation M is to allow consumers to compare one lease with another
for the same vehicle and to compare leasing a vehicle with buying it on credit. However, the
disclosure requirements do not apply to lease transactions over $25,000.
See our Web Site on Consumer Guide to Vehicle Leasing at:
http://www.in.gov/dfi/education/leasing.htm.
See Interactive Auto Calculator: Should I lease or purchase at:
http://www.financenter.com/products/sellingtools/calculators/auto/.
Leasing Terms
Lessee. The consumer.
Lessor. The company that owns the automobile.
Gross capitalized cost. The price of the car for leasing purposes.
Capitalized cost reduction. Amount of cash down payment, trade-in, or rebate.
Residual Value. The automobile's value at the end of the lease. Also known as
guaranteed future value or lease-end value, it is often expressed as a percentage of
the Manufacturers Suggested Retail Price (MSRP). The higher the residual value, the
less depreciation you pay. The residual value may be a negotiable figure. To
determine it, many dealers consult a publication called Automotive Leasing Guide, a
useful tool for predicting future value.
Rent Charge. An amount paid by the lessee that may include interest, overhead, and
profit.
Money Factor. This figure, also known as the lease rate or monthly lease fee, is the
interest rate built into all leases. It is leasing's version of the annual percentage rate
of interest (APR) that is charged to people who buy on credit. Leasing companies do
not usually disclose the money factor except when competing with other lessors.
Advantages of Leasing
The monthly payment is lower than when buying a car. In some cases there is no
down payment at all.
Leasing puts the driver in a new car every two or three years. For some consumers,
this is an important lifestyle consideration. Leasing also allows consumers to drive a
more expensive vehicle than they can afford to buy.
Leasing is easier since negotiating over the price is downplayed.
Vehicles are subject to wear as they age. A lease allows consumers to side-step the
issue. By the time the car needs expensive repairs, the lease will have ended.
There is no hassle with a trade-in at the end of the lease.
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source: in.gov
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