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
Total finance charges for the term of the lease
Rent Charge
Number of months in the lease
Lease term
Price to buy the car at the end of the lease; residual value used for calculations of the depreciation amount
Purchase option
Penalty charged if the lease ends early or the car is stolen or destroyed in an accident
Early termination
A state that protects consumers against chronically defective vehicles
Lemon laws
What are two advantages of renting
Lower monthly payments
Mobility
Less responsibility
What are three disadvantages of renting
Increasing costs over time
No investment value
No tax deduction
Restrictions on use of property
Uncertainty
Cash paid upfront to a home purchase
Down payment
Insurance charged to a mortgage borrower to protect the lender against the risk that the borrower will default
Mortgage insurance
Transaction costs paid at the closing of a home purchase
Closing costs
Meeting where you finalize paperwork to purchase a home
Closing
Long-term amortized loan that is secured by real property
Mortgage
Each monthly payment covers interest charges and some principal repayment
Amortization
Financial institution selling the mortgage to another financial institution
Secondary mortgage market
Fixed rate and payment mortgage that typically lasts 15 to 30 years and is amortization
Conventional Mortgage
Fixed payment for 5 or 7 years then the rate is variable
Adjustable rate mortgage (ARM)
A mortgage where the final payment is larger than earlier payments
Balloon mortgage
Table that details the payment, principal, interest, and balance owed over the life of a loan
Amortization Schedule
A legal document that evidences ownership of real estate
Deed
Reserve account held by a mortgage lender in which prepayments of property taxes and homeowners insurance are held to be used to pay these costs.
Escrow Account
Ensures that the seller is giving you the ownership rights for which you have contracted
Title insurance
