Car Lease Terms Explained
Every lease term defined clearly, with real examples using current market data. Click any term for a detailed explanation, examples, and FAQs.
Lease Cash
Also known as: Lease Bonus, Lease Subvention Cash, Lease Incentive
Lease cash is a manufacturer incentive that reduces the capitalized cost of a lease, lowering the monthly payment. It is only available when leasing, not purchasing.
Money Factor
Also known as: Lease Rate, MF, Lease Interest Rate
A money factor is the interest rate on a car lease expressed as a small decimal. Multiply the money factor by 2,400 to convert it to an approximate APR.
Residual Value
Also known as: Residual, Lease-End Value, Guaranteed Future Value
Residual value is the projected worth of a leased vehicle at the end of the lease term, expressed as a percentage of MSRP. Higher residual values result in lower monthly lease payments.
Disposition Fee
Also known as: Lease Return Fee, Turn-In Fee, End-of-Lease Fee
A disposition fee is a charge (typically $300-$500) assessed by the leasing company when you return a leased vehicle at the end of the lease term. It covers the cost of inspecting and reselling the vehicle.
Acquisition Fee
Also known as: Bank Fee, Lease Initiation Fee, Administrative Fee
An acquisition fee is a one-time charge by the leasing company to originate the lease, typically $595-$1,095. It is usually rolled into the capitalized cost rather than paid upfront.
Capitalized Cost
Also known as: Cap Cost, Gross Cap Cost, Adjusted Cap Cost, Lease Price
The capitalized cost is the total amount being financed in a lease — the lease equivalent of a purchase price. The gross cap cost starts at the negotiated selling price; the adjusted cap cost is after subtracting lease cash, trade-in equity, and down payment.
Due at Signing
Also known as: DAS, Drive-Off Amount, Amount Due at Signing, Lease Down Payment
Due at signing (DAS) is the total upfront payment required when signing a car lease. It includes the first month's payment, down payment (if any), acquisition fee, taxes, registration, and dealer fees.
Excess Mileage Charge
Also known as: Over-Mileage Fee, Excess Miles Penalty, Mileage Overage
An excess mileage charge is a per-mile fee ($0.15-$0.30) assessed at lease end for every mile driven over the contracted mileage allowance, typically 10,000-15,000 miles per year.
GAP Insurance
Also known as: Guaranteed Asset Protection, GAP Coverage, Lease GAP
GAP insurance covers the difference between what you owe on a lease and what the vehicle is worth if it is totaled or stolen. Most lease contracts include GAP coverage at no additional cost.
Lease Buyout Price
Also known as: Purchase Option Price, Buyout Amount, Residual Purchase Price
The lease buyout price is the amount you can purchase the vehicle for at the end of the lease, typically equal to the residual value plus any remaining fees. It is stated in your lease contract.
Wear and Tear
Also known as: Excess Wear Charges, Lease Wear and Tear, Normal Wear and Tear
Wear and tear charges are fees assessed at lease return for vehicle damage that exceeds what the leasing company considers normal use. Typical excess wear charges range from $500 to $2,000 or more.
Early Lease Termination
Also known as: Early Termination Fee, Lease Early Payoff, Breaking a Lease
Early lease termination is the act of ending a car lease before the contracted term expires. The penalty typically includes all remaining payments plus an early termination fee, making it one of the most expensive ways to exit a lease.
Subvented Lease
Also known as: Subsidized Lease, Manufacturer Lease Special, Incentivized Lease
A subvented lease is a manufacturer-subsidized lease program that offers a below-market money factor, an inflated residual value, or bonus lease cash to make monthly payments more attractive. The best lease deals are almost always subvented.
Purchase Option
Also known as: Lease Purchase Option, Lease-End Purchase, Buyout Option
A purchase option is the contractual right to buy a leased vehicle at a predetermined price (typically the residual value) at the end of the lease term. Every consumer lease includes a purchase option.
Mileage Allowance
Also known as: Annual Mileage Limit, Contracted Mileage, Lease Mileage Cap
The mileage allowance is the maximum number of miles you can drive per year under a lease agreement, typically 10,000, 12,000, or 15,000 miles. Exceeding this limit results in per-mile excess mileage charges at lease end.
Lease Transfer
Also known as: Lease Assumption, Lease Swap, Lease Takeover
A lease transfer is the process of transferring your lease obligation to another person, who assumes all remaining payments and terms. Most manufacturers allow lease transfers for a fee of $300-$500.
Security Deposit
Also known as: Lease Security Deposit, MSD, Multiple Security Deposits
A lease security deposit is a refundable payment made at signing that can lower the money factor on a lease. The multiple security deposits (MSD) strategy involves making several deposits to significantly reduce the interest rate.
Lease-End Inspection
Also known as: Pre-Return Inspection, Lease Turn-In Inspection, Vehicle Condition Report
A lease-end inspection is a vehicle condition assessment conducted before you return a leased car, identifying any excess wear or damage that may result in charges. Most manufacturers offer a free pre-return inspection 4-6 weeks before lease end.
Open-End vs Closed-End Lease
Also known as: Closed-End Lease, Open-End Lease, Walk-Away Lease, TRAC Lease
A closed-end lease is the standard consumer car lease where you can walk away at lease end with no further obligation regardless of the vehicle's market value. An open-end lease makes the lessee responsible if the vehicle is worth less than the residual value.
Lease Assumption
Also known as: Lease Takeover, Assuming a Lease, Lease Transfer In
A lease assumption is the process of taking over someone else's existing car lease, inheriting their remaining payments, mileage allowance, and lease terms. Sites like Swapalease and LeaseTrader connect lease sellers with potential buyers.