Acquisition Fee (aka BANK FEE)

Fee charged by a lessor to cover the administrative costs of preparing, approving, and administrating the lease. May be paid upfront or included in the gross capitalized cost.

Adjusted Capitalized Cost

The amount capitalized at the beginning of the lease, after adding any fees or other charges to be included, and subtracting any capitalized cost reductions, such as rebates, trade-in allowances, and cash reductions.

Allowable Mileage

This is the number of miles you are allowed to drive over the term of the lease. Often this is stated as the number of miles per year you can drive. The average lease allows 15,000 miles a year. If more miles are needed to fit your driving needs we can accommodate this for you. On a three-year lease, that means you can drive a total of 45,000 miles. If the allowable miles are exceeded, you typically must pay between 10 and 17 cents per mile. See Excess Mileage below.

Capitalized Cost

Often used to refer to the negotiated selling price of a vehicle to be leased. It may be used to refer to the gross capitalized cost or the adjusted capitalized cost.

Capitalized-cost Reduction

The total of any cash payment, trade-in allowance, or rebate used to reduce the gross capitalized cost. The capitalized cost reduction is subtracted from the gross capitalized cost to get the adjusted capitalized cost. Here at Hollywood Motors Consulting, we structure all our leases with all rebates, discounts, and, dealer cash.

Captive Finance Company

Leasing or finance company owned by or otherwise associated with a particular vehicle manufacturer. Generally, these leases are known as Sub Vented Lease. See Sub Vented Lease Below.

Closed-end Lease

A Lease that allows the lessee to return the vehicle at the end of the lease term with no further financial obligation, assuming that the lessee has complied with all of the terms of the lease. The lessee may be responsible for a disposition fee if it is part of the lease agreement. There may be additional charges according to the terms of the lease for any excess mileage or excess wear. The lessee is not responsible for any difference between the residual value, as stated in the lease, and the vehicle’s actual value at the lease’s end. At Hollywood Motors Consulting, most of our leases are Closed-end. 


The amount the vehicle declines in value over the term of the lease. The depreciation may be calculated by subtracting the residual value from the adjusted capitalized cost. Using this method, the depreciation amount will also include any amounts added by agreement to the price of the vehicle to arrive at the gross capitalized cost.

Disposition Fee

The fee is charged by the lessor if the lessee does not purchase the vehicle at lease-end for costs associated with preparing the car for resale and selling the car. The disposition fee must be disclosed in the lease agreement.

Early Termination

Ending a lease before the scheduled termination date. The lessee will typically be required to pay an early termination charge as described in the lease agreement.

Early Termination Charge

The fee is charged to a lessee in the event of an early termination of a lease. Penalties vary from lease to lease and the calculation method is determined at lease inception and explained in the lease agreement.

Early Termination Payoff

The total amount the lessee owes if the lease is terminated early before subtracting any credit for the value of the vehicle. The payoff is calculated as described in the lease agreement.

Excess Mileage Charge

The fee is charged for each mile more than the predetermined mileage limit, as outlined in the lease agreement. The excess mileage charge varies depending on the type of vehicle and is typically between $0.10 and $0.17 per mile.

Excessive Wear and Tear Charge

A charge is collected by the lessor at the end of the lease for damage to the vehicle that is beyond what is allowed by the terms of the lease. In a consumer lease, excess wear and tear or normal wear and tear will be specifically defined.

Gap Coverage

A type of insurance coverage that covers the difference between the payoff of the lease and the amount covered by other insurance coverage, when a vehicle is damaged or stolen during the term of the lease. Most gap coverage requires that the lessee not be in default under the terms of the lease.

Gross Capitalized Cost

The negotiated price of the vehicle, plus any other amounts you agree to include in the capitalized cost, such as fees, insurance premiums, service contract premiums, or prior vehicle loan or lease payoff.

Lease Term

The period of time covered by the lease agreement.


The party is entitled to possession and use of the vehicle according to the terms of the lease.


The legal owner of the property that is leased.

Loan Origination Fee

The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; is usually computed as a percentage of the face value of the loan.

Mileage Allowance or Mileage Limit

The vehicle’s total mileage may be driven over the lease term, without incurring liability for additional mileage charges.

Money Factor

Lessors often use a number to calculate the average monthly rent charge portion of the lease payment.


The Manufacturer’s Suggested Retail Price.

Open-end Lease

Type of lease in which the lessee is responsible for the difference between the residual value and the realized value at the end of the lease. The lessee may be entitled to a refund if the realized value exceeds the residual balance.

Purchase Option

The lessee’s right to purchase the leased vehicle, either at the end of the lease or during the lease term, as specified in the lease agreement. The lease agreement may or may not include a purchase option.

Purchase Option Fee

Fee in addition to the purchase price required to exercise a purchase option, according to the lease terms.

Realized Value

The value assigned to the vehicle at lease termination. Check your lease agreement for a definition that may range from the value received by the lessor, the highest offer received by the lessor, the vehicle’s “fair market value,” the wholesale value, or the retail value.

Rent or Rent Charge

The portion of the monthly lease payment is in addition to the depreciation and amortized amounts.

Residual Value

The lease-end value of the vehicle is established at the beginning of the lease. This value is used in determining the monthly lease payment. The residual value is also used to determine the depreciation and other amortized amounts that go into determining the monthly lease payment.

Security Deposit

A refundable deposit, usually equal to one monthly payment, is collected by the lessor at the beginning of the lease to offset any amounts due under the lease term.

Sub Vented Lease

A lease that the manufacturer or other lessor subsidizes. Many subvented leases offer lower monthly payments by utilizing a higher residual value than other lessors or by submitting a lower rent portion of the monthly payment.

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