A charge included in most lease transactions that is either paid up front or is included in the gross capitalized cost. It may be called a bank fee or an assignment fee. This fee usually covers a variety of administrative costs such as the costs of obtaining a credit report, verifying Insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease in data processing and accounting systems.

A party who is covered by another party's Insurance policy. The lessor typically requires you to name the lessor as an additional insured under your vehicle Insurance policy.

The amount capitalized at the beginning of the lease, equal to the gross capitalized cost minus the capitalized cost reduction. This amount is sometimes referred to as the net cap cost.

See personal property tax below.

Amounts such as taxes, fees, charges for service contracts, payments for Insurance, and any prior credit or lease balance that are included in the gross capitalized cost and are paid as part of the base monthly payment.

The total of any capitalized cost reduction, monthly payments paid at signing, security deposit, title and registration fees, and other amounts due before you take delivery of the vehicle.

The annualized cost of credit expressed as a percentage in a finance agreement. In a lease, there is no annual percentage rate or equivalent rate.

A third party that buys a lease agreement from a lessor. You become obligated to the assignee, and the assignee generally assumes the responsibilities of the lessor, although some obligations may remain with the lessor.

The sale of a lease agreement and transfer of the ownership rights for the leased vehicle from the lessor to an assignee. Many leases are assigned at the time the lease is signed.

A lessor that sells the lease agreement and transfers the ownership rights for the leased vehicle to an assignee.

The portion of the monthly payment that covers depreciation, any amortized amounts, and rent charges. It is calculated by adding the amount of depreciation, any other amortized amounts, and rent charges and dividing the total by the number of months in the lease. Monthly sales/use taxes and other monthly fees are added to this base monthly payment to determine the total monthly payment.

An entity that arranges for the sale or lease of vehicles through another party.

A lease of personal property to (1) an individual to be used primarily for business, commercial, or agricultural purposes or (2) an organization such as a partnership, corporation, or government agency. The Consumer Leasing Act and Regulation M do not apply to business leases.

Shortened term for either gross capitalized cost or adjusted capitalized cost, both required disclosures under federal law. Some states require that the term "capitalized cost" be used in state lease disclosures.

The sum of any down payment, net trade-in allowance, and rebate used to reduce the gross capitalized cost. The cap cost reduction is subtracted from the gross cap cost to get the adjusted cap cost.

A finance company related to a particular automobile manufacturer or distributor.

A lease in which you are not responsible for the difference if the actual value of the vehicle at the scheduled end of the lease is less than the residual value, assuming that you have stayed within the mileage and wear and tear limits stated in your lease agreement. However, you are responsible for other lease requirements.

A lease of personal property to an individual to be used primarily for personal, family, or household purposes for a period of more than four months and with a total contractual obligation of no more than $25,000. A lease meeting all of these criteria is covered by the Consumer Leasing Act and Federal Reserve Regulation M. If any one of these criteria are not met, for example, if the leased property is used primarily for business purposes or if the total contractual obligation exceeds $25,000, the Consumer Leasing Act and Regulation M do not apply. See total contractual obligation below.

A 1976 amendment to the Truth in Lending Act that requires disclosure of the cost and terms of consumer leases and also places substantive restrictions on consumer leases. See consumer lease above.

Generally, the time at which you and the lessor sign the lease agreement.

A fee charged by some dealers to cover the expenses of preparing a vehicle for lease. The dealer may be reimbursed by the manufacturer for this expense.

Your failure to meet one or more conditions of your lease agreement. Default may result in early termination of the lease.

Total amount charged to cover the vehicle's projected decline in value through normal use during the lease term as well as other items that are paid for over the lease term. It is calculated as the difference between the adjusted capitalized cost and the vehicle's residual value. This amount is a major part of your base monthly payment.

Information on the financial and other terms and conditions of a lease, including information required by federal regulation (Regulation M) and by state laws. Required disclosures must be made in writing before the lease is consummated. Advertisements that include key lease terms (the amount of any payment or a statement of payments due before consummation or delivery) must also include certain disclosures. Under Regulation M, certain disclosures must be grouped together and segregated from other information (See segregated disclosures below). Other required disclosures appear elsewhere in the lease documents (See nonsegregated disclosures below).

A fee often charged by a lessor to defray the cost of preparing and selling the vehicle at the end of the lease if the vehicle is not purchased and is returned to the lessor.

A fee often charged by a lessor to cover the cost of preparing lease documents.

Ending of the lease before the scheduled termination date for any reason. The reason may be voluntary or involuntary (for example, the vehicle is returned early, stolen, or totalled, or you default on the lease). In most cases of early termination, you must pay an early termination charge.

The amount you owe if your lease ends before its scheduled termination date, calculated as described in your lease agreement. The earlier your lease is terminated, the greater this charge is likely to be. The charge is generally the difference between the early termination payoff and the amount credited to you for the vehicle.

The total amount you owe if your lease is terminated before the scheduled end of the term. The payoff is calculated as described in your lease agreement before subtracting the value credited to you for the vehicle. The early termination payoff may include the unpaid lease balance and other charges.

A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income, or the exercise of any right under the Consumer Credit Protection Act.

A charge by the lessor for miles driven in excess of the maximum specified in the lease agreement. The excess mileage charge is usually between $0.10 and $0.25 per mile. Suppose, for example, that your lease specifies a maximum of 36,000 miles and a charge of $0.15 per mile over the maximum. If you drive 37,000 miles, the excess mileage charge will be $0.15 x 1,000, or $150. Open-end leases typically do not include an excess mileage charge.

Amount charged by a lessor to cover wear and tear on a leased vehicle beyond what is considered "normal." The charge may cover both interior and exterior damage, such as upholstery stains, body dents and scrapes, and tire wear beyond the limits stated in the lease agreement. Open-end leases typically do not include an excessive wear and use charge.

A contract that can be purchased to cover the costs of parts and service on a vehicle beyond the manufacturer's original warranty period.

The amount that a willing buyer would pay to a willing seller to purchase certain property at a particular point in time.

Your right to purchase the vehicle you have leased according to terms specified in your lease agreement for a price determined by referring to a readily available guide to used car values or to other independent sources.

The federal agency with rule-writing authority for the Truth in Lending Act, of which the Consumer Leasing Act is part; officially known as the Board of Governors of the Federal Reserve System. The Board also performs other functions related to U.S. monetary policy, financial system stability, bank supervision and regulation, and the nation's payments system.

The federal agency responsible for enforcing the Truth in Lending Act, of which the Consumer Leasing Act is part, among leasing companies, finance companies, and lessors not regulated by other federal agencies. The Federal Trade Commission also performs other functions related to its role of ensuring that the nation's markets function competitively, enforcing other statutes affecting consumer financial services, and enforcing the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.

The total amount you will pay for taxes, licenses, registration, title, and official (governmental) fees over the term of your lease. Because fees and taxes may change during the term of your lease, they may be stated as estimates.

Your right to purchase the vehicle you have leased for a fixed price as specified in your lease agreement.

A lease in which the lessor assumes responsibility for all manufacturer-recommended maintenance and service on the vehicle. The lease may also cover additional mechanical repairs and servicing during the term of the lease. The cost of this service usually is included in the gross capitalized cost or is added to the base monthly payment.

In the event a leased vehicle is stolen or totaled, the difference between the early termination payoff and the amount for which the vehicle is insured before the Insurance deductible and any other policy deductions are subtracted. The definition of gap amount may vary in different states or in different lease agreements.

A plan that provides you financial protection in case your leased vehicle is stolen or totaled in an accident. There are two types of gap coverage. One is a waiver by the lessor of the gap amount if the vehicle is stolen or totaled. The other is a contract by a third party to cover the gap amount. Under either type, you may remain responsible for the Insurance deductible and for other amounts deducted from the insured amount of the vehicle by your Insurance company.

The agreed-upon value of the vehicle, which generally may be negotiated, plus any items you agree to pay for over the lease term (amortized amounts), such as taxes, fees, service contracts, Insurance, and any prior credit or lease balance.

Amounts rebated or credited, or special programs offered, to consumers or lessors to encourage the lease of certain vehicles.

A leasing company that offers leases directly to consumers and businesses and is generally not affiliated with a particular automobile manufacturer.

A contract in which one party agrees to pay for another party's financial loss resulting from a specified event (for example, collision, theft, or storm damage). Lease agreements generally require that you maintain vehicle collision and comprehensive Insurance as well as liability Insurance for bodily injury and property damage.

The process of obtaining verbal or written confirmation of required coverage from your Insurance agent or company.

A fee charged for a past-due payment. This charge is usually either a percentage of the lease payment or a fixed dollar amount.

A payment received after the specified due date. In most cases, a late payment triggers a late charge after any grace period.

A contract between a lessor and a lessee for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.

See rent or rent charge below.

Continuation of a lease agreement beyond the original term, often one month at a time. There may be a charge for extending the lease. If the extension continues beyond six months, new lease disclosures must be provided.

See money factor below.

A percentage used by some lessors to describe the rent charge portion of your monthly payment. No federal standard exists for calculating the lease rate. Any rates or factors used in lease calculations do not have to be disclosed under federal law. If a lease rate is given as a percentage in an advertisement or on any lease form, the ad or form must also state, "This percentage may not measure the overall cost of financing this lease."

The period of time for which a lease agreement is written.

State laws that provide remedies to consumers for vehicles that repeatedly fail to meet certain standards of quality and performance. Lemon laws vary by state and may not cover leased vehicles.

The party to whom the vehicle is leased. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement.

The original owner of the vehicle or property being leased. See assignment above.

A federal excise tax assessed on vehicles with a gross vehicle weight of less than 6,000 pounds and a value exceeding a threshold amount, which is adjusted periodically for inflation.

Care for the vehicle required by the lease agreement. Maintenance may include manufacturer-recommended servicing and any repairs needed to keep the vehicle in good operating condition.

A lease agreement in which some or all of the vehicle maintenance and servicing is the responsibility of the lessor.

The fixed mileage limit for the lease term. If you exceed this limit, you may have to pay an excess mileage charge.

A number, often given as a decimal, used by some lessors to determine the rent charge portion of your monthly payment. This number is not a lease rate and cannot be converted to a lease rate by moving the decimal point.

This term may refer to one of two required federal disclosures. See base monthly payment above and total monthly payment below.

The state and local taxes that you must pay monthly when you lease a vehicle. These payments, if any, are added to your base monthly payment and paid as part of your total monthly payment.

Manufacturer's suggested retail price, sometimes called the sticker price.

Disclosures required by Federal Reserve Regulation M that may be presented in any order and may appear anywhere in the lease documents except with the segregated disclosures. Page 2 of the sample lease form shows these disclosures. See also segregated disclosures below.

A lease agreement in which the amount you owe at the end of the lease term is based on the difference between the residual value of the leased property and its realized value. Your lease agreement may provide for a refund of any excess if the realized value is greater than the residual value. In an open-end consumer lease, assuming you have met the mileage and wear standards, the residual value is considered unreasonable if it exceeds the realized value by more than three times the base monthly payment (sometimes called the "three-payment rule"). If you believe the amount owed at the end of the lease term is unreasonable and refuse to pay, the lessor may attempt to prove that the residual value was reasonable when it was set at the beginning of the lease. However, if you cannot reach a settlement with the lessor, you cannot be forced to pay the excess amount unless the lessor brings a successful court action and pays your reasonable attorney's fees.

See purchase option below.

See early termination payoff above.

A tax on personal property. State laws govern whether personal property taxes apply to a leased vehicle; your lease agreement governs whether you or the lessor will pay these taxes.

The portion of the gross capitalized cost representing the amount due under a previous credit contract after crediting the value of the vehicle traded-in on the lease.

The portion of the gross capitalized cost representing the balance due from a previous lease agreement after crediting the value of the previously leased vehicle.

Your right to buy the vehicle you have leased, before or at the end of the lease term, according to terms specified in the lease agreement. Your lease agreement may or may not include a purchase option.

An amount, in addition to the purchase price, you may have to pay to exercise any purchase option in your lease agreement.

(1) The price received by the lessor for the leased vehicle at disposition, (2) the highest offer for the leased vehicle at disposition, or (3) the fair market value of the leased vehicle at termination. The realized value may be either the wholesale or the retail value as specified in the lease agreement.

The requirement of the Consumer Leasing Act that charges for delinquency, default, or early termination be reasonable in light of the lessor's or assignee's (1) anticipated or actual harm caused by such delinquency, default, or early termination, (2) difficulties in proving loss, and (3) inconvenience in obtaining a remedy.

An amount offered by some manufacturers, dealers, or lessors that may be paid to you separately or credited to your lease agreement.

The process of preparing a vehicle for resale or re-lease if you return it.

An amount that you may pay at the beginning of the lease that may be used by the lessor to offset any amounts you may owe at the end of the lease term for excessive wear and use and excess mileage. Any remaining amount may be refunded to you.

A fee charged by a state motor vehicle department to register a vehicle and authorize its use on the public roadways.

The regulation issued by the Federal Reserve Board that implements the Consumer Leasing Act.

The portion of your base monthly payment that is not depreciation or any amortized amounts. This charge is similar to interest on a loan.

The end-of-term value of the vehicle established at the beginning of the lease and used in calculating your base monthly payment. The residual value is deducted from the adjusted capitalized cost to determine the depreciation and any amortized amounts. It is an estimate that may be determined in part by using residual value guidebooks. The residual value may be higher or lower than the realized value at the scheduled end of the lease.

Publications used in part by some lessors to establish vehicle residual values. Different guidebooks are more popular in different regions of the United States and with different lessors.

Sales/use taxes, which vary from state to state, are assessed on both leased and purchased vehicles. There are often differences in what amounts are taxed and when the taxes are assessed. In a lease, sales/use taxes may be assessed on (1) the base monthly payment, (2) any capitalized cost reduction, and (3) in a few states, the adjusted capitalized cost. In most states, the sales/use tax on the base monthly payment is paid monthly; in some states, however, the tax is due at lease inception. Sales/use taxes on the capitalized cost reduction and the adjusted capitalized cost are usually due at lease inception. If you exercise any purchase option, separate taxes may apply.

An amount you may be required to pay, usually at the beginning of the lease, that may be used by the lessor in the event of default or at the end of the lease to offset any amounts you owe under the lease agreement. Any remaining amount may be refunded to you.

If stated in your lease agreement, a lessor's legal right to your property (such as stocks or bonds) that secures payment of your obligation under the lease agreement.

Disclosures required by Federal Reserve Regulation M that must be grouped together and separated from other information in the lease documents. The first page of the sample lease form shows the disclosures that must be segregated. See also non-segregated disclosures above.

A contract that you may purchase to cover such expenses as the repair or replacement of vehicle components and that may pay for related services such as towing or replacement rental cars. In most cases, service contracts do not cover routine maintenance unless specified in the lease agreement.

A lease that requires a single payment made in advance rather than periodic payments made over the term of the lease. This lump-sum payment may be less than the total amount you would pay were you to make periodic payments over the term of the lease.

Statements in the lease agreement defining what the lessor means by "normal wear and use" and setting forth the requirements for the vehicle's condition at the end of the lease. Standards may address such things as the amount of tread remaining on the tires at the end of the lease or the type of dents or scratches that are acceptable. These standards must be reasonable.

Oral or written contractual transfer of your right to use the leased vehicle to another person. Such a transfer is usually prohibited without the lessor's approval.

A program or plan in which certain items are subsidized by the manufacturer, the finance company, or the lessor.

See disposition fee or disposal fee above.

See open-end lease above.

Legal document that identifies the owner of the vehicle. The lessor, not you, holds title to the leased vehicle.

The sum of the capitalized cost reduction, the total of base monthly payments, and other charges due under the lease agreement. The total contractual obligation excludes any security deposit as well as sales taxes and any other fees and taxes paid to a third party. If the total contractual obligation exceeds $25,000, the Consumer Leasing Act does not apply.

The base monthly payment plus monthly sales or use taxes and any other monthly charges.

The sum of the periodic payments, the end-of-term disposition fee, any "other charges," and all "amounts due at lease signing or delivery," minus refundable amounts such as a security deposit and any monthly payments included in the "amount due at lease signing or delivery."

The net value of your vehicle credited toward the purchase or lease of another vehicle. If you own the vehicle being traded-in, you sell it to the dealer or lessor. If you are leasing the vehicle being traded-in, you are turning in the vehicle (either at the scheduled end of the lease or upon early termination) to the dealer or lessor. The amount credited may be positive or negative depending on the value of the vehicle and any remaining balance on your credit, loan, or lease agreement.

See monthly sales/use tax above.

Leasing of previously owned or driven vehicles.

See closed-end lease above.

A guarantee that the vehicle will function and perform as specified. A warranty usually covers specified mechanical problems during a specified period of time or number of miles.