 TITLE: What Is a Car Lease and How Does It Work? CONTENT: What to Consider Before Leasing a Car\n-------------------------------------\nThe language in a car lease agreement may be new to you and can sometimes be confusing. Here are some of the common terms and their definitions:\n*   **Acquisition fee**: Some dealerships or leasing companies charge an upfront fee for arranging the lease. You may be able to negotiate this fee or find a lease without an acquisition fee.\n*   **Buyout price**: You may be able to end the lease at any time by buying the car outright. The buyout price may decrease over time as the car depreciates.\n*   **Capitalized cost**: Often shortened to cap cost, this is the initial price of the car. You can negotiate the cap cost just as you would when buying a car.\n*   **Cap cost reductions**: You may be able to reduce your cap cost in various ways, such as negotiating the price, trading in a car or making a down payment. Because you pay for the depreciation between the cap cost and the residual value (the value of the car at the end of the lease), cap cost reductions can lead to lower monthly payments.\n*   **Disposition fee**: You may have to pay a disposition fee at the end of your lease to help cover the dealership's costs for getting the car ready to sell. Even if you can't negotiate the fee upfront, you may be able to negotiate it down when you return the car if you offer to buy the car, buy a car or start a new lease with the dealership.\n*   **Gap insurance**: Insurance that covers the difference between a car's residual value and what your auto insurance company pays out if the car is totaled. Some lessors require you purchase this and include the insurance premiums in your monthly payment.\n*   **Lease term**: The length of the lease, which is often two to four years.\n*   **Mileage allowance**: How many miles you're allowed to drive each year before the per-mile penalty begins. You can sometimes negotiate a higher mileage allowance, but may have to pay more each month as a result.\n*   **Money factor**: Also called a lease factor, lease rate or rent charge, the money factor determines part of your monthly payment. The money factor is often shown as a small decimal fraction, but you can convert it into an interest rate by multiplying the number by 2,400. For example, a cap rate of .0025 equals an interest rate of 6%.\n*   **Purchase option agreement**: Your lease may specify how much you can purchase the car for once your lease ends.\n*   **Residual value**: The value of the car at the end of the lease, which may be determined by a third party.\n*   **Security deposit**: You may have to pay a security deposit, which the lessor holds on to and can use to cover damage or extra-mileage charges when you return the car. If you don't owe any extra fees, you'll receive the full security deposit back. END