How to Understand Leasing Terminology

If you’ve been looking at cars for sale but it’s not the right time for you to buy one, Roesch Ford suggests that it might be a good time to investigate leasing. Maybe you’re hesitant to consider leasing because you’ve never done it before. Yes, the terminology is different – and can be confusing to first-time lessees. So let’s take a look at the language. Understanding the vocabulary can help you decide whether to lease or to buy.

One of the most confusing terms is “money factor.” But if you already know that APR is an acronym for Annual Percentage Rate, then it’s fairly easy to grasp that money factor is similar. Convert the money factor to APR by multiplying by 2400. For example, if the money factor on a lease is 0.00125, multiply by 2400 and you’ll get 3.0, or a 3.0 percent APR.

“Residual value” is another confusing term. It boils down to the worth of the vehicle at the end of the lease. So instead of paying the full purchase price for a car, you’ll pay only the purchase price MINUS the residual value, and that dollar figure (plus interest and fees) will be divided into monthly payments. That means you’ll end up paying only for the value that the car loses while you drive it. If the purchase price today is $20,000 but the car will be worth only $10,000 in three years, then your lease payments will be based on $10,000, not $20,000.

Roesch Ford stands ready to help you understand these terms and more about leasing. We’ll be happy to answer any questions you might have. Just give us a call today at (888) 708-5726 or come see us at 333 West Grand Avenue in Bensenville, IL. Leasing might be the best choice for your next vehicle.