Want lower initial costs – A lease down payment can be lower that a finance down payment.

Want lower monthly payments – Monthly lease payments are based on the portion of the vehicle’s value that you intend to use.

Want to drive a more luxurious vehicle – When you lease, you can drive a new vehicle with more features and luxuries for about the same monthly payment as a less-equipped financed vehicle.

Want to drive a new vehicle more often – Lease terms are often shorter than finance terms, allowing you to get into a new vehicle more often.

Want to drive a vehicle during its most trouble-free years – Most manufacturers can tailor a warranty to fit their lease program.

Want to avoid trade-in obligations – With a closed-end lease, you can return your vehicle at the end of the lease term and walk away; turn it in and lease another vehicle; or buy it.

Want to pay taxes only on your monthly payment – Instead of financing the lump sum of taxes, you are taxed on the individual payment you make each month.

Lease: An agreement under which the vehicle owner (lessor) permits its use by a customer (lessee) for an agreed-upon period of time (term).

Lessee: The user of the leased vehicle.

Lessor: The owner of the leased vehicle.

Term: A contractual period for which the lessee agrees to use and pay for the use of the vehicle.

Lease Rate: The interest rate used to compute the monthly lease payment.

Leased Vehicle Amount: This is the amount agreed upon by the lessee and the lessor for the vehicle and any other items, such as accessories, extra equipment, freight, applicable taxes (e.g., federal air-conditioning tax) and pre-delivery inspection. GST is not included.

Residual: The estimated value of the vehicle at the end of the lease term, used in the calculation of the monthly payment.

Depreciation: The difference between the leased vehicle amount and residual, or the amount assessed the lessee for vehicle use.

Administrative Fee: Administration costs that are a direct result of ownership of the vehicle by the lessor (e.g., insurance follow-up, monthly handling of GST, remarketing of returned vehicles and GAP protection).

Guaranteed Asset Protection (GAP):
If an accident, fire or theft results in the total loss of the vehicle, auto insurance will cover its fair market value, minus the deductible. Often this settlement is not enough to cover the financial obligation for which the lessee is responsible. With GAP protection, the lessee does not have to worry about a gap between the lease contract obligation and the insurance settlement. All he or she pays is the insurance deductible, provided that all of the contractual agreements of the lease have been fulfilled prior to the accident or theft.

Purchase Option: A lease agreement provision allowing the lessee to purchase the vehicle at either scheduled termination or early termination. The purchase option at lease termination is a fixed dollar amount determined at the time of lease signing.

Security Deposit: A refundable dollar amount paid by the lessee to the lessor at the time of lease signing. This amount can be used to pay all or part of the lessee’s excess kilometrage or excess uses charges, or other amounts owed at lease end.

Excess Kilometrage: Kilometrage exceeding the allowed kilometrage as outlined in the lease agreement.

Excess Kilometrage Charge: A charge per kilometer that is assessed for kilometrage driven in excess of the contractual allowance.

Excess Wear and Tear Provisions: A section of the lease agreement that establishes the lessee as responsible for the expense to repair or replace vehicle parts which are worn or damaged beyond what the leasing company considers normal.

Annual Percentage Rate (APR): The rate used to compute the finance charge expressed as an annual percentage. The APR is the annualized interest rate when interest is paid at intervals other than annually.

Total Lease Charges: The total lease charges are the total interest and non-interest charges the lessee pays over the term of the lease. These charges are comparable to the finance charges on an installment loan.

Traditional financing is a financing option in which you borrow the amount you need to buy a vehicle, and then repay that amount, plus interest, with the long-term goal of owning that vehicle. The advantages include: no kilometer limitations and, at the end of the financing term, you own the vehicle.