Unit 6 Flashcards
Loss in value due to wear and tear. You can estimate this as the initial value divided by the number of months of useful life, but new cars often lose more value in the first year
Depreciation
Total price as manufacturers suggested retail price (MSRP) plus additional charges
Sticker Price
Price that the dealer paid to purchase the vehicle
Dealers invoice price
Service agreement that for a set price extends an original warranty or adds services and coverage
Extended warranty
Owner of item being leased
Lessor
The one who agreed to pay money for the right to use the item for the period of the contract
Lesse
Amount amount by the value of an asset is greater than any outstanding debt secured by the asset
Equity
Why lease?
Low monthly payment for lesse. Full ownership at end for lessor
What determines the cost of an auto lease
Difference between the initial value of the car and the resale value at the end of the lease
What is the difference between closed and open leases?
Closed leases have the lessor take risk that the resale value will be less than estimate.
Open leases require the lesse to bear risk of greater expected lease
Fee charged if you choose not to purchase vehicle at the end of the lease
Disposition fee
Price you negotiate for the vehicle
Gross capitalized costs
Credit report and or application processing
Up-front fees
Down payment/rebate
Capitalized cost reduction
Expected depreciated value of the vehicle at the end of the lease term
Residual value
