Residual Value, Lease-End Value, Guaranteed Value, Estimated Wholesale: All four of these terms are used to identify the vehicle's predicted wholesale value at the end of the lease. This value is established at the start of the lease by the leasing company and varies according to lease term, mileage allowance, make and model.

Residual Calculation: The leasing company is able to calculate the residual from studying the historic depreciation percentages that are learned from comparing the new car retail value to the Kelley Blue Book used car wholesale value. The study proves the percent of value the aged vehicle will retain of its original MSRP. The percentage is then applied to the MSRP of the lease vehicle to express the residual value in dollars. (i.e., MSRP $20,000 times' 60% = $12,000 residual).

MSRP: The manufacturers suggested retail price. As explained, the vehicle's MSRP and the residual percentage are the two factors used to calculate the residual value on every lease written in the USA.. Generally, a high residual value (predicted wholesale value) applies to vehicles in high demand but short supply. Automobiles with a high predicted resale value gives the lease customer more car for the leasing dollar. In other words, if all vehicles had the same MSRP, the one with the highest projected wholesale value would be the most attractive lease.

Refundable Security Deposit: A security deposit is a cash deposit made at the beginning of the lease to be held until lease end as a security for performance of all obligations. The security deposit is usually equal to one month's payment. 

General Car Leasing never requires a Security Deposit or last month's rent.

Money Factor: The rate used by the leasing company to calculate the lease's total rent charges (service charge). The money factor is expressed in a figure, i.e.,(.00189). Generally, the lower the money factor, the less your payments will be. However, it is important to note that the Federal Government has adopted a mandated revision of "Federal Regulation M" (The law governing consumer lease disclosures). The new law became effective October 1, 1997. The revisions govern every consumer lease contract offered in the United States regardless of the leasing source, whether manufacture, national associated bank, state chartered bank, national fleet bank, credit union, independent lease dealer, new and used car dealers. The newly revised regulation prohibits the use of any language, oral or written, that implies Rent Charges are the same as or similar to an interest rate, APR, or financing charge. As a result of the new regulation, the money factor will not be disclosed on any lease agreement. To our knowledge, there isn't a lease agreement written anywhere in the USA that discloses the Money Factor on the actual Lease Contract. Instead, each and every consumer lease agreement written in the United States expresses the Rent Charge in dollars and cents.

 

In addition to the Rent Charge, each and every lease contract written in the USA will disclose:

1. The agreed upon value of the vehicle.

2. Capitalized Cost. The sum of the Agreed Value and any amortized amounts.

3. Capitalized Cost Reduction Payment. The amount of any rebate, cash payment, net trade-in allowance or non-cash credit that reduces the Capitalized Cost.

4. Adjusted Capitalized Cost. The balance of the Agreed value and any amortized amounts after the cap reduction has been subtracted..

5. Residual Value. The value of the vehicle at the end of the lease that is used to calculate the base monthly payment.

6. The total sum of depreciation and any amortized amounts to be paid over the term of the lease.

7. Rent Charge. The total of all rental charges to be paid over the term of the lease in addition to the depreciation and any amortized amounts.

8. Total Of Base Monthly Lease Payments. The total of depreciation and any amorized amounts plus the rental charges.

9. The base monthly payment.

10. The monthly sales/use tax to be added to the base monthly payment.

11. The number of monthly payments during the lease.

12. The total monthly lease payment. The sum of the base payment and sales tax.

13. The purchase option price at the end of the lease.

14. The excessive wear and use charges. 
  
Use Tax: With a lease the sales tax rate is charged on the monthly payment. For example, customers living in Los Angeles county would be charged  8.25% tax on the lease's monthly payment. Customers living in Orange County would be charged sales tax at the rate of 7.75% and so forth.. If the lease's base monthly payment is $400, the monthly sales tax for the L.A. County resident would be $33.00. If the lease is for 36 months, the total sales tax for the term of the lease would be $1,188.00.

On a purchase the sales tax is based on the purchase price of the automobile. For example, if the purchase price is $30,000 a buyer living in L.A. County would have to pay $2,475.00 sales tax. The Lease Customer pays only $1,188, therefore, the Lease Customer saves $1,287 in sales tax.

Capitalized Cost Reduction: An optional initial payment (down payment) on a lease that can significantly reduce your monthly payments. The leasing company may take a trade in instead of, or in addition to, a cash payment.

Low Mileage Lease: A lease that provides a higher residual for low mileage drivers. 10,000 and 12,000 miles per year may quality the driver for a lower monthly payment.

Excess Mileage: The standard 15,000 miles per year allowance covers most drivers. However, if you feel you will be driving over the 15,000 mile limit, you can add the mileage to your lease. The mileage can be paid as part of your monthly payments at a rate as low as 17 cents per mile. This "mileage up front" system will also lower the lease-end value of the vehicle by the same amount. It's important that you determine - as close as possible - the mileage you will drive. If you prepay for additional mileage and do not use it all, some leases refund unearned, but prepaid miles. Your refund will be equal to the original mileage rate used to calculate the amount of prepayment. The refund is paid providing the total is greater than $1 and you do not elect to exercise the Purchase Option. If you exceed 15,000 miles per year and do not prepay to include excess miles up front, you will be charged for all extra miles at lease end. The excess miles' rate varies between leasing companies. Excess miles are a moot point if you sell the vehicle yourself. Many customers having driven excess miles will sell the lease vehicle to a private party, which then eliminates any excess mileage charge. Other customers may purchase the vehicle at lease end to avoid paying for excess miles.

At General Car Leasing the excess mile charge is 17 cents per excess mile. Other Lease companies charge as high as 30 cents per excess mile. 

General Car Leasing also offers a Lease Plan that realizes 15,000 free bonus miles for the customer. For example, your lease payment could be based on 12,000 miles per year but you end up driving at the rate of 15,000 miles per year. The General Car Leasing Plan creates a waiver on the excess miles and you gain 15,000 free bonus miles.

End of Lease: At the end of your lease you have four options: 1) return the vehicle and lease again; or 2) check the market value and buy it to keep; or 3) buy it and sell at a profit; or 4) walk away risk free.

Purchase Option: An option written into a lease at its start that gives the lessee the opportunity to buy the vehicle at lease end for a predetermined price.

Early Purchase Option: General Car Leasing offers a lease that allows the customer to purchase the vehicle on any month during the lease. The Purchase Option Price is equal to the adjusted lease balance at the time of early purchase. Each lease payment allows for a reduction of the adjusted lease balance. The more lease payments you make the lower the adjusted lease balance becomes and the lower the early purchase option price.

Lessee: The customer who leases the vehicle from a dealer or leasing company.

Lessor: The dealer or leasing company that leases the vehicle to the customer.

Term Of Lease: Lease terms range between 24 months and 66 months. As in conventional financing, the monthly payments vary with the monthly term. As a rule of thumb, the monthly payments are lowest on a 66 month lease and highest on a 24 month lease. To determine the length of lease that works best for you, begin by picking the monthly term where the payments fit your budget. You should also consider the specific time when you will want your next new vehicle. Sound planing on your part is important.

Early Termination Option: Most leases can be early terminated on any month during the term of the lease for an Early Turn-In Fee of $395. In other words, the lessee can pay $395, cancel the lease before the term expires and return the vehicle to the Lessor. The Lessor then obtains 3 wholesale bids to establish the value of the vehicle. If the highest bid is less than the adjusted lease balance, the lessee is responsible for the difference. However, the lessee may sell the vehicle at  retail, or trade it or buy it outright for the adjusted lease balance and erase all liabilities. Buying, selling or trading the vehicle will also erase excess miles and excess wear and tear charges.

Vehicle Valuation at Early Termination: When a vehicle is returned early, the Lessor obtains 3 wholesale bids to establish what is called "Realized Value". The lessee may also obtain an independent appraisal from a qualified appraiser to establish the Realized value. If the customer doesn't want to bother getting an independant bid, the highest of the 3 wholesale bids obtained by the Lessor is used to determine the lessee's early termination responsibility.

Gap Waiver: If the lease is terminated early, as a result of the total loss of the vehicle due to: collision; destruction; theft, the lessor will waive any loss not paid by your primary car insurance. Free gap coverage is an important benefit to the Lessee but is not offered by all Lessors.

General Car Leasing includes free Gap Coverage on every lease. 

Insurance: All lessors require that you pay for and maintain your own car insurance during the term of the lease. The minimum coverage's are: public liability $100,000/$300,000; property damage $50,000; collision maximum deductible $1,000; comprehensive including fire and theft maximum deductible $1,000.

Wear and Tear: If you keep your vehicle in good condition and follow the manufacturers scheduled maintenance recommendations, you should not have any problems with excess wear and tear. Excess wear is defined as any damage not resulting from normal wear and tear. For example, scratches and dents are not normal wear. Bald tires is not normal wear. A crack in the windshield is not normal wear. Tears in the upholstery is not normal wear. A blown engine is not normal wear. Broken accessories is not normal wear.

 Here's what to do to help keep wear and tear at a minimum:

Protect the vehicle's paint finish with regular washes and waxes.

Rotate the tires regularly and keep them properly inflated to minimize tire wear.

Replace any items that have been lost or damaged. This may include outside mirrors, hubcaps, antennas, etc.
Repair any major dents or body damage and any chips and cracks in the windshield.

Closed-end versus Open-end Lease: Closed-end and open-end refer to who bears the risk of the vehicle's worth at the end of the lease. At the end of a closed-end lease, the lessee can safely walk away as the lessor bears the market valuation risk. On the contrary, at the end of an open-end lease, the lessee shares in the risk of the market value as the vehicle could be worth less than the estimated wholesale. A closed-end lease, therefore, is safer and preferred over an open-end lease.