Auto Leasing Terms Glossary


Read More About Leasing

If you’re considering leasing a new vehicle, the process can seem overwhelming. We’ve assembled a list of vehicle leasing term definitions  to help you navigate all the jargon, contracts and negotiating. Learn the ins and outs of lease agreements before you start searching for the perfect vehicle.  For more information about leasing a vehicle in the GTA contact Somerville Auto

Acquisition Fee

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You may be charged this fee by some leasing companies as a processing fee to take delivery of the leased vehicle. It may be capitalized and is often non-negotiable.

Early Termination Fee

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A lease is terminated if the lessee decides to end their lease agreement early, total loss of the vehicle, or the vehicle is stolen. When this happens you may be charged a hefty fine, having gap insurance can help cover the costs if your lease is terminated due to theft or collision.

Depreciation

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The amount by which a vehicle lowers in value over a specified period of time. The amount which is the difference between its original price and its residual term value later. No specific depreciation rate is written in the lease agreement.  

Gap Insurance

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Gap insurance covers the difference between the cash value of the vehicle and what you still owe on the lease contract. Some leases include this in the contract.

Lease Term

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The agreed upon period (usually 24 or 36 months) that you are paying for and in possession of the leased vehicle. Contracts vary in length and can be discussed before signing your contract.

Mileage allowance

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Your lease agreement comes with a maximum number of kilometres that the vehicle can be driven each year. This allowance will be stated in your agreement and is roughly 24,000 km depending on your contract and this amount is likely negotiable. If you think you’ll need a few extra kilometres, negotiate this at the start of the lease to avoid a mileage charge.

Mileage charge

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The lessee will be fined for exceeding the mileage allowance. The best way to avoid this (besides sticking to your mileage allowance) is to add kilometres at the start of your lease term.

Monthly Payment

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The agreed upon payment price due every month. This price will be in your contract lease agreement.

Purchase option

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At the end of your lease agreement you may be given the opportunity to purchase the vehicle.  The price is usually included in the lease contract and is equal or around the residual value of the vehicle.

Termination fee
(or disposal/disposition fee)

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The termination fee applies to those who do not choose to purchase their vehicle at the end of the agreement. This fee can include administrative charges, any penalties, the dealer's cost to prepare the vehicle for inventory and more. This fee can be negotiated at the start of your lease agreement.

Wear-and-tear charges

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Charges for damage that is deemed more than “normal” or acceptable. While all cars will assume some damage after a few years of driving, you are expected to return the vehicle in good working and aesthetic condition. Have these damages outlined in the lease agreement to avoid surprises at the end of your term.

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