GLOSSARY OF LEASING TERMS
Sometimes, leasing language can sound pretty intimidating. So we've given you a glossary of all the key terms you should know if you're considering leasing your next new vehicle.
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Annual Percentage Rate
The total lease charges expressed as an annual rate.
Closed end
This lease type means you make a set number of lease payments during the term of your lease and return the vehicle to the leasing company at the end of the lease term. You are not required to make any additional payments unless there is physical damage to the vehicle, considered excess wear and tear, or the number of kilometres you have driven is higher than the kilometre limit set out in the lease.
Default
Default occurs when you fail to comply with any terms of the lease contract. Your lease contract will set out specific circumstances which will result in your being in default.
Depreciation
This is the loss in the vehicle's value that occurs over time. The longer you keep the vehicle and the more you drive it, the more the vehicle will depreciate. In your lease the depreciation may be referred to as the Amount to be Amortized.
Downpayment
A taxable cash pre-payment of the vehicle lease, reducing the Leased Vehicle Amount which may be used to reduce the monthly payments and or residual of your lease.
Excess Kilometres
The cost you face if you drive your vehicle more than the maximum kilometres stated on your lease. This charge is set out as a number of cents for each kilometre over the stated maximum kilometres, plus taxes.
Excess Wear & Tear
Every vehicle will experience normal wear & tear from every day use. Excess wear & tear is over and above the expected normal wear & tear as specified in your lease contract.
Extension
At the end of the original lease contract, you may extend the lease for an additional period, if the provision is included in your Lease Agreement.
Fair Market Value
The value of the vehicle based on the wholesale market price.
GAP Protection
If the vehicle is in an accident and is damaged beyond repair, GAP protection will cover the difference (the gap) after you pay the deductible, between the current payout of your lease and the amount of your insurance settlement.
Lease Term
The number of months that your lease will be in effect.
Leased Vehicle Amount
This is the amount you and the leasing company agree on for the vehicle and any other items such as accessories, extra equipment, freight, applicable taxes (such as air conditioning tax), and pre-delivery inspection.
License & Registration Fees
The provincial ministry cost to licence and register a vehicle prior to delivery.
Minimum Term
The minimum number of months lease payments must be made prior to exercising a purchase option.
Open End
This lease type means you make a set number of lease payments during the term of your lease and you are responsible for the residual value. This lease does not have a wear & tear or excess kilometre clause.
Purchase Option
If your lease has an option to purchase the vehicle, the purchase option price must be clearly stated.
Residual Value
Is unless otherwise stated, the estimated Wholesale value of your vehicle at the end of your lease.
Security Deposit
Is a non-interest bearing deposit on a lease, refunded at lease termination, unless it is used to pay out any remaining amounts that you may owe.
Total Lease Charges
The Total Lease Charges are the total carrying costs you pay over the term of the lease. This amount is similar to the cost of borrowing charges on a loan. These charges represent a portion of your monthly lease payment, the other portion is depreciation.
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