Car Lease Glossary
Common car-lease terms explained in plain English, what they mean, whether they're normal, and how to negotiate them.
Money factor
The lease's interest rate, written as a tiny decimal instead of a percentage.
Residual value
The car's projected worth at lease end, which sets your payment and buyout price.
Capitalized cost
The negotiated price of the car for leasing purposes, plus any added fees.
Mileage allowance & overage fees
The yearly miles you're allowed before per-mile charges kick in at lease end.
Disposition fee
A flat fee charged when you return the car at lease end instead of buying it.
Acquisition fee
An up-front bank fee to set up the lease, charged at signing.
GAP coverage
Protection that covers the difference if your leased car is totaled or stolen.
Excess wear and tear
Damage beyond normal use that you're charged for when you return the car.
Early termination
Ending a lease before the term is up can trigger large payoff and penalty charges.
Lease buyout / purchase option
Your option to buy the car at lease end (or sometimes earlier) for a set price.
Cap cost reduction
Any upfront money — down payment, trade-in, or rebate — that lowers the amount you finance.
Buy rate
The unmarked money factor the lender actually offers — before the dealer adds profit.
Lease transfer (assumption)
Handing your remaining lease payments to another person so you can exit early.
One-pay lease
Paying the entire lease up front in a single lump sum in exchange for a lower money factor.
Subvented lease
A manufacturer-subsidized lease with an artificially low money factor or inflated residual.