Car Buying and Leasing Terminology
Get to know these key dealer terms before you start the car buying/leasing process:
Acquisition fee: A fee leasing companies charge to arrange the lease. Usually not negotiable, but can be rolled into the lease agreement. Also known as a bank fee.
Capitalized cost: For leasing, this is the price that will be financed through the lease. It’s best to try to negotiate down from the offered price. Your down payment (a cap cost reduction) will lower the cap cost.
Down payment: An initial payment toward the car purchase or lease.
Invoice price: The price the manufacturer charges the dealer for the car. If you know this price before you negotiate for a car, you will know how much the dealer is trying to make on the sale.
Drive-off Fee: Quite literally, the amount you pay the dealer to drive the leased vehicle off the lot. It includes your first month’s payment, various fees like the acquisition (bank) fee, tags, registration and title, and may include taxes.
Manufacturer’s suggested retail price (MSRP or sticker price): The price manufacturers suggest the dealers charge for the car. Negotiating down from this is optimal, but may not be possible if the car model is in high demand.
Market value: The price that others in your area have paid for a car. This provides an accurate reflection of what the car is really worth.
Money factor: The leasing term for an interest rate. Convert this to an annual percentage rate (APR) by multiplying the money factor by 2,400.
Residual: At the end of the lease, this is the car’s worth. This is what’s left over after the car is depreciated during the lease.
Term: The number of months you will pay on the loan or lease.
Sources for Finding and Pricing Cars