To Lease or Not to Lease

2. Leasing Terminology
If you're going to play their leasing games, you'd better speak their language.

Base Monthly Payment The base payment is the amount being applied to the depreciation of the car over the term of the lease plus the amount being applied to the lease company's fee. (This "fee" is often mistakenly considered to be "interest." It is not. It is exactly what it says it is: a fee.)

The final lease might incorporate other charges, costs, taxes, and fees spread out over the term. But those are not part of the base.

"Cap Cost" or Capitalized Cost The equivalent of the selling price.

Cap Cost Reduction A discount off the list price. Often when the manufacturer is subsidizing a lease, you'll see a statement like: "Based on 90 percent of the capitalized cost." What this means is that the lease is figured on the list price less 10 percent. Or you might see it expressed this way: "MSRP $4,2, 000 including destination charges. Monthly payments based on a capitalized cost of $3'7, 000. " You can read that as a $5,000 discount off the list price.

Down Payment The down payment is the amount of cash that the lessor may ask the lessee to pay upon signing the lease agreement. In most leases this down payment can be factored into the monthly payments if you so desire. It can also be negotiated.
The effect of the down payment is both to reduce the "perceived" amount of the customer's monthly cost and to put more money in the lessor's hands up-front.