The definitions in this glossary are meant to give you, the consumer, a general understanding of terms used in vehicle leasing. They are not legal definitions but they generally assume compliance with applicable legal requirements. The terms may be used differently in different situations, and their exact definition under federal law may differ from that under state law. Please refer to the Federal Reserve Board’s Regulation M and the Consumer Leasing Act for more information about federal requirements for lease disclosures and terms. This glossary does not cover credit transactions, even those that have similarities to leasing.
Some of the definitions refer to monthly payments. If your lease has a different payment period (for example, bi-weekly or annual), you may substitute that period in the definitions. Also, the definitions generally are applicable to both single-payment and multiple-payment leases.
This Leasing Language Glossary has been mutually developed by the Federal Reserve Board (FRB) and the ACVL.
Acquisition fee. 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, an administrative 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.
Actuarial method. See Constant yield method.
Additional insured. A party that is covered by another party’s insurance policy. The lessor typically requires you to name the lessor or assignee 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.
Ad valorem tax. See Personal property tax.
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.
Amount due at lease signing or delivery. 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.
Arranger. See Broker.
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. An assignee may be a lessor for purposes of Regulation M when the assignee has substantial involvement in the lease.
Assignment. 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.
Assignor. A lessor that sells the lease agreement and transfers the ownership rights for the leased vehicle to an assignee.