In an effort to meet all of our members' needs in the most efficient and convenient way possible, NJFCU offers you this valuable Auto Research Center. This feature offers you online access to car-buying services, car rental discounts, and even an online application. You will also find at the bottom of this page some valuable negotiating tips along with a glossary of terms involved in the car buying process. Before you purchase your next vehicle be sure to stop by our Auto Research Center to find your best possible deal.

Negotiating Tips
Glossary of Terms

CarsforMembers.com
This service, offered free to members of NJFCU, is designed to assist you with the purchase of your next vehicle. Find out about special rates, option packages, dealer pricing guides, even arrange discount pricing. Your personal CarsforMembers.com representative can arrange an appointment for you at a local dealership and if there is a specific model you are looking for, they will help you locate it, usually within 24 hours. Click here for more information about CarsforMembers.com.

MVCP (Motor Vehicle Certification Program)
This no-fee consumer service can direct you to participating dealers in your area who honor pre-negotiated prices. Consumer Advisors are also available after your transaction to ensure that you received a fair price as well as all applicable rebates and incentives. Simply dial 800-345-0990 to speak with a Consumer Advisor or click here for more information about this great service.

Enterprise Car Sales
Whether you need to buy a used car, truck, minivan or SUV, our 160+ used car dealers have access to a used car inventory of thousands of vehicles nationwide. Haggle-free used car prices are below NAAA or Kelly Blue Book Used Car Retail Values^TM. Click here for more information.

Chrome Carbook
This website allows you to search online for new and used vehicles based on a variety of criteria. You can search for your next vehicle based on Year, Make & Model, Price Range, even Monthly Payment amounts. Once you have selected your search range, Chrome will provide you with a detailed report of vehicle costs in your area and can even get a quote for you. Click here to learn more today.

Safe & Secure Online Applications
After you've researched your next vehicle and have gotten the very best deal on the price, be sure to visit NJFCU for the very best deal on the financing. Click here and apply for your next vehicle loan right online.

Negotiating Tips

Buying a new or used vehicle is an experience most all of us have in common. We also share the desire to "get the best deal possible." The following tips can help you in this important decision-making process.

How to Determine a Fair Purchase Price
Once you've decided on the specific vehicle just right for you, negotiating the "price you will pay" is the next step. You have far greater control over determining this price than you may think. Knowledge is key. The more information you have about the actual dealer cost versus the manufacturer's suggested retail price (MSRP), commonly referred to as "sticker price," the more effectively you can negotiate the best purchase price.

1. First, start with the vehicle's factory invoice price. Officially, that's the amount the dealer paid for the vehicle. It includes the base cost of the vehicle and all optional equipment. This information is readily available from numerous sources.
2. Next, subtract any rebates or factory-to-dealer incentives. Cash-back rebates are often prominently advertised, but factory-to-dealer incentives may be a different story. Unadvertised or "hidden" incentives may be hundreds of dollars (or more) the dealer will receive from the manufacturer when the vehicle is sold. Unless you know about such an incentive and ask for it, the dealer will not readily disclose this information.
3. Then add any dealer installed options, such as undercoating, rust proofing, etc. In addition, most manufacturers charge the dealer a national advertising fee, which is added to the cost of the vehicle. Both the advertising fee and destination/delivery charges typically appear on the vehicle window sticker price. While the national advertising fee and destination cost are typically not negotiable, dealer installed options can be negotiated.
   

One final word of caution: watch out for "Additional Dealer Markup" (ADM), or "Additional Dealer Profit" (ADP) as it is sometimes called. This additional fee is just what it sounds like - a baseless charge some dealers add to the price of a vehicle to increase their profits. There is no reason to pay this charge unless the vehicle you want is in such extremely high demand the dealer you're negotiating with is the only one that has it. Otherwise, if you see this charge listed on the sticker, simply refuse to pay it.
Once you have completed the above calculations you will arrive at a bottom line, in essence what it actually will cost the dealer for the vehicle you want. Recognizing dealers are in a business to make a profit, it is only reasonable that they would not want to sell the vehicle to you for this "bottom line" number. Therefore, you will need to decide how much dealer profit you are willing to add to the bottom line. You can calculate this by adding a percentage (for example, 1% to 5%) to the bottom line or a dollar amount (for example, $200 to $500). Once you determine what price you are willing to pay, including an allowance for dealer profit, simply make this offer to the dealer. It would be presented simply as, "I am willing to pay $xx,xxx for this vehicle." It is then up to the dealer to decide whether they are willing to accept that price. If not, they will make a counter offer and then it is your choice to decide whether you want to pay their counter offer. If you and the dealer cannot reach an agreement, find another dealer that offers the same vehicle. If after checking with one or more dealers and none are willing to accept your offer, the probability is you will need to increase your offer to obtain that vehicle.

How to Negotiate

If you dread the prospect of negotiating with a car salesperson, you're not alone - the popularity of certain dealers' haggle-free pricing policies proves it. Your best bet is to keep things in perspective. While it's true an experienced salesman can easily sell in one day as many new cars as you will buy in your lifetime, you've done your homework and determined a fair price for the vehicle you want. The only question is which dealer will agree to that price.

First, NEVER TELL THE DEALER DURING NEGOTIATIONS ON THE PURCHASE PRICE THAT YOU MAY BE TRADING IN YOUR CURRENT VEHICLE OR HOW YOU PLAN TO PAY FOR IT. ALWAYS NEGOTIATE THE PURCHASE PRICE AS THOUGH IT IS A STRAIGHT CASH PURCHASE WITH NO TRADE-IN.

Once you have arrived at a price you are willing to pay it is recommended you sleep on it overnight. Then, advise the dealer you have changed your mind and now want to trade in your current vehicle. The question is: "How much will you give me on trade for my current vehicle?" This amount would then be subtracted from the previously negotiated purchase price to give you your bottom line cost for the vehicle.

In terms of financing, you will be making a cash purchase by having your loan pre-approved at NJFCU. Often dealers will negotiate a better price with a customer who is paying "cash." The fact that you are obtaining the "cash" in terms of a loan from NJFCU should be no concern of theirs. The check you obtain from us will be like "cash" to the dealer.

How do you determine a fair value for your trade-in?

Determining a fair value for your current vehicle, if you've decided to trade it rather than sell it privately, is important. NJFCU has access to resources such as Kelley Blue Book and/or NADA Price guides that can be used to calculate a fair value for your current vehicle. While you're almost certain to get a better price for your current car by selling it yourself, many members prefer the convenience of trading in your used vehicle. The used vehicle market varies so widely, ultimately your vehicle is worth whatever someone will pay you for it or what the dealer is willing to offer you as a trade.

Each of these negotiations - purchase price and trade-in, is completely separate. Keep them that way, even when the dealer tries to combine them - for example, by asking you to name a monthly payment you can live with. Judging the best possible deal becomes quite a bit more complicated when you're forced to juggle different issues at the same time. Keep focused on each stage of the process, first the purchase price of the vehicle and then the trade-in value of your current vehicle. By taking this "focused" approach, you will ultimately end up with the best deal possible.

Beware of dealer or manufacturer low financing offers.

When it comes to vehicle loans, the lower the interest rate, the better the deal, right? Not necessarily! Even the lowest interest rates dealers advertise, like 2.9% or 0.9%, can come with steep hidden costs and heavy restrictions. For example, the low rate may only be available…

• On very short-term loans, which means higher monthly payments for you.
• For a short "introductory" period. The rate could skyrocket at the end of that period, or even sooner as a penalty for making a late payment.
• If you have a perfect credit rating.
• If you make an unusually large down payment.

Typically, dealers offer you the choice between a low rate and a cash-back rebate. Because they will almost never let you negotiate both the vehicle's purchase price and the interest rate, there's a good chance you'll have to take the rebate. But that's not a bad thing. Taking the rebate, deducting it from the cost of the vehicle and financing the balance through NJFCU is your best deal.

Remember, when a dealer offers you a financing package, he is usually acting as a middleman for a bank or finance company that has partnered with the dealership. The dealer has a vested interest in getting you to accept his financing package, since the finance company is probably paying him a commission on each financing package he sells. In other words, his interest is in making money.

NJFCU, on the other hand, has your best interest in mind. Not only are we in the business of making loans to members, but we are a not-for-profit financial institution. That allows us to offer vehicle loans, which usually provide more savings than those of banks, finance companies and car dealerships.

About the only advantage dealer financing offers is convenience - accept it and you can drive off the lot with your new vehicle and financing. Unfortunately, this will probably be at a higher monthly payment than when you apply these tips. Of course, if you have your vehicle loan pre-approved before you go shopping, you can have financing arranged even before you drive onto the dealer's lot! And beyond providing you with shopping convenience, pre-approval lets you negotiate from a more secure position by eliminating any doubts about how much vehicle you can afford.

Glossary

The definitions in this glossary are meant to give you, our member, a general understanding of the terminology used with vehicle leasing. They are to be used for informational purposes only and are not legal definitions. The terms may be used differently in different situations, and their exact definition under federal law may differ from that under state law. Please refer to Federal Reserve Regulation M, which implements the Consumer Leasing Act, for more information about federal lease disclosures and terms.

Acquisition fee -- A charge included in most lease transactions that is either paid upfront or is included in the gross capitalized cost. It may be called a bank fee or an assignment fee. This fee usually covers a variety of administrative costs, such as the costs of obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation, and entering the lease in data processing and accounting systems.

Additional insured -- A party who is covered by another party's insurance policy. The lessor typically requires you to name the lessor as an additional insured under your vehicle insurance policy.

Adjusted capitalized cost (adjusted cap cost) -- The amount capitalized at the beginning of the lease, equal to the gross capitalized cost minus the capitalized cost reduction. This amount is sometimes referred to as the net cap cost.

Ad valorem tax -- See Personal property tax.

Amortized amounts -- Amounts such as taxes, fees, charges for service contracts, payments for insurance, and any prior credit or lease balance that are included in the gross capitalized cost and are paid as part of the base monthly payment.

Amount due at lease signing or delivery -- The total of any capitalized cost reduction, monthly payments paid at signing, security deposit, title and registration fees, and other amounts due before you take delivery of the vehicle.

APR (annual percentage rate) -- The annualized cost of credit expressed as a percentage in a finance agreement. In a lease, there is no annual percentage rate or equivalent rate.

Assignee -- A third party that buys a lease agreement from a lessor. The lessee becomes obligated to the assignee, and the assignee generally assumes the responsibilities of the lessor, although some obligations may remain with the first lessor.

Assignment -- The sale of a lease agreement and transfer of the ownership rights for the leased vehicle from the lessor to an assignee. Many leases are assigned at the time the lease is signed.

Assignor -- A lessor that sells the lease agreement and transfers the ownership rights for the leased vehicle to an assignee.

Base monthly payment -- The portion of the monthly payment that covers depreciation, any amortized amounts, and rent charges. It is calculated by adding the amount of depreciation, any other amortized amounts, and rent charges then dividing the total by the number of months in the lease. Monthly sales/use taxes and other monthly fees are added to this base monthly payment to determine the total monthly payment.

Broker -- An entity that arranges for the sale or lease of vehicles through another party.

Business lease -- A lease of personal property to (1) an individual to be used primarily for business, commercial, or agricultural purposes or (2) an organization such as a partnership, corporation, or government agency. The Consumer Leasing Act and Regulation M do not apply to business leases.

Capitalized cost - The shortened term for either gross capitalized cost or adjusted capitalized cost, both require disclosures under federal law. Some states require that the term "capitalized cost" be used in state lease disclosures.

Capitalized cost reduction (cap cost reduction) -- The sum of any down payment, net trade-in allowance, and rebate used to reduce the gross capitalized cost. The cap cost reduction is subtracted from the gross cap cost to get the adjusted cap cost.

Captive finance company -- A finance company related to a particular automobile manufacturer or distributor.

Closed-end lease ("walk-away" lease) -- A lease in which you are not responsible for the difference if the actual value of the vehicle at the scheduled end of the lease is less than the residual value, assuming you have stayed within the mileage and wear limits stated in your lease agreement. However, you are responsible for other lease requirements.

Consumer lease -- A lease of personal property to an individual to be used primarily for personal, family, or household purposes for a period of more than four months and with a total contractual obligation of no more than $25,000. A lease meeting all of these criteria is covered by the Consumer Leasing Act and Federal Reserve Regulation M. If any one of these criteria is not met, for example, if the leased property is used primarily for business purposes or if the total contractual obligation exceeds $25,000, the Consumer Leasing Act and Regulation M do not apply. See Total contractual obligation.

Consumer Leasing Act -- A 1976 amendment to the Truth in Lending Act that requires disclosure of the cost and terms of consumer leases and also places substantive restrictions on consumer leases. See Consumer lease.

Consummation -- Generally, the time at which you and the lessor sign the lease agreement.

Dealer preparation fee -- A fee charged by some dealers to cover the expenses of preparing a vehicle for lease. The manufacturer for this expense may reimburse the dealer.

Default -- Your failure to meet one or more conditions of your lease agreement. Default may result in early termination of the lease.

Depreciation and any amortized amounts -- Total amount charged to cover the vehicle's projected decline in value through normal use during the lease term as well as other items that are paid for over the lease term. It is calculated as the difference between the adjusted capitalized cost and the vehicle's residual value. This amount is a major part of your base monthly payment.

Disclosures -- Information on the financial and other terms and conditions of a lease, including information required by federal regulation (Regulation M) and by state laws. Required disclosures must be made in writing before the lease is signed. Advertisements that include key lease terms (the amount of any payment or a statement of payments due before signing or delivery) must also include certain disclosures. Under Regulation M, certain disclosures must be grouped together and segregated from other information (see Segregated disclosures). Other required disclosures appear elsewhere in the lease documents (see Nonsegregated disclosures).

Disposition fee or disposal fee -- A fee often charged by a lessor to defray the cost of preparing and selling the vehicle at the end of the lease if the vehicle is not purchased and is returned to the lessor.

Documentation fee -- A fee often charged by a lessor to cover the cost of preparing lease documents.

Early termination -- Ending of the lease before the scheduled termination date for any reason. The reason may be voluntary or involuntary (for example, the vehicle is returned early, stolen, or totaled, or you default on the lease). In most cases of early termination, you must pay an early termination charge.

Early termination charge -- The amount you owe if your lease ends before its scheduled termination date, calculated as described in your lease agreement. The earlier your lease is terminated, the greater this charge is likely to be. The charge is generally the difference between the early termination payoff and the amount credited to you for the vehicle.

Early termination payoff -- The total amount you owe if your lease is terminated before the scheduled end of the term. The payoff is calculated as described in your lease agreement before subtracting the value credited to you for the vehicle. The early termination payoff may include the unpaid lease balance and other charges.

Equal Credit Opportunity Act -- A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income, or the exercise of any right under the Consumer Credit Protection Act.

Excess mileage charge -- A charge by the lessor for miles driven in excess of the maximum specified in the lease agreement. The excess mileage charge is usually between $0.10 and $0.25 per mile. Suppose, for example, that your lease specifies a maximum of 36,000 miles and a charge of $0.15 per mile over the maximum. If you drive 37,000 miles, the excess mileage charge will be $0.15 x 1,000, or $150. Open-end leases typically do not include an excess mileage charge.

Excessive wear and use charge (excess wear and tear charge) -- Amount charged by a lessor to cover wear and tear on a leased vehicle beyond what is considered "normal." The charge may cover both interior and exterior damage, such as upholstery stains, body dents and scrapes, and tire wear beyond the limits stated in the lease agreement. Open-end leases typically do not include an excessive wear and use charge.

Extended warranty -- A contract that can be purchased to cover the costs of parts and service on a vehicle beyond the manufacturer's original warranty period.

Fair market value -- The amount that a willing buyer would pay to a willing seller to purchase certain property at a particular point in time.

Fair market value purchase option -- Your right to purchase the vehicle you have leased according to terms specified in your lease agreement for a price determined by referring to a readily available guide to used car values or to another independent source.

Federal Reserve Board -- The federal agency with rule-writing authority for the Truth in Lending Act, of which the Consumer Leasing Act is part; officially known as the Board of Governors of the Federal Reserve System. The Board also performs other functions related to U.S. monetary policy, financial system stability, bank supervision and regulation, and the nation's payments system.

Federal Trade Commission -- The federal agency responsible for enforcing the Truth in Lending Act, of which the Consumer Leasing Act is part, among leasing companies, finance companies, and lessors not regulated by other federal agencies. The Federal Trade Commission also performs other functions related to its role of ensuring that the nation's markets function competitively, enforcing other statutes affecting consumer financial services, and enforcing the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.

Fees and taxes (or official fees and taxes) -- The total amount you will pay for taxes, licenses, registration, title, and official (governmental) fees over the term of your lease. Because fees and taxes may change during the term of your lease, they may be stated as estimates.

Fixed price purchase option -- Your right to purchase the vehicle you have leased for a fixed price as specified in your lease agreement.

Full maintenance lease -- A lease in which the lessor assumes responsibility for all manufacturer-recommended maintenance and service on the vehicle. The lease may also cover additional mechanical repairs and servicing during the term of the lease. The cost of this service usually is included in the gross capitalized cost or is added to the base monthly payment.

Gap amount -- In the event a leased vehicle is stolen or totaled, the difference between the early termination payoff and the amount for which the vehicle is insured before the insurance deductible and any other policy deductions are subtracted. The definition of gap amount may vary in different states or in different lease agreements.

Gap coverage (Guaranteed Auto Protection or GAP) -- A plan that provides you financial protection in case your leased vehicle is stolen or totaled in an accident. There are two types of gap coverage. One is a waiver by the lessor of the gap amount if the vehicle is stolen or totaled. The other is a contract by a third party to cover the gap amount. Under either type, you may remain responsible for the insurance deductible and for other amounts deducted from the insured amount of the vehicle by your insurance company.

Gross capitalized cost (gross cap cost) -- The agreed-upon value of the vehicle, which generally may be negotiated, plus any items you agree to pay for over the lease term (amortized amounts), such as taxes, fees, service contracts, insurance, and any prior credit or lease balance.

Incentives -- Amounts rebated or credited, or special programs offered, to consumers or lessors to encourage the lease of certain vehicles.

Independent leasing company -- A leasing company that offers leases directly to consumers and businesses and is generally not affiliated with a particular automobile manufacturer.

Insurance -- A contract in which one party agrees to pay for another party's financial loss resulting from a specified event (for example, a collision, theft, or storm damage). Lease agreements generally require that you maintain vehicle collision and comprehensive insurance as well as liability insurance for bodily injury and property damage.

Insurance verification -- The process of obtaining verbal or written confirmation of required coverage from your insurance agent or company.

Late charge -- A fee charged for a past-due payment. This charge is usually either a percentage of the lease payment or a fixed dollar amount.

Late payment -- A payment received after the specified due date. In most cases, a late payment triggers a late charge after any grace period.

Lease -- A contract between a lessor and a lessee for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.

Lease charge -- See Rent or rent charge.

Lease extension -- Continuation of a lease agreement beyond the original term, often one month at a time. There may be a charge for extending the lease. If the extension continues beyond six months, new lease disclosures must be provided.

Lease factor -- See Money factor.

Lease rate -- A percentage used by some lessors to describe the rent charge portion of your monthly payment. No federal standard exists for calculating the lease rate. Any rates or factors used in lease calculations do not have to be disclosed under federal law. If a lease rate is given as a percentage in an advertisement or on any lease form, the ad or form must also state, "This percentage may not measure the overall cost of financing this lease."

Lease term -- The period of time for which a lease agreement is written.

Lemon laws -- State laws that provide remedies to consumers for vehicles that repeatedly fail to meet certain standards of quality and performance. Lemon laws vary by state and may not cover leased vehicles.

Lessee -- The party to whom the vehicle is leased. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement.

Lessor -- The original owner of the vehicle or property being leased. See Assignment.

Luxury car tax -- A federal excise tax assessed on vehicles with a gross vehicle weight of less than 6,000 pounds and a value exceeding a threshold amount, which is adjusted periodically for inflation.

Maintenance -- Care for the vehicle required by the lease agreement. Maintenance may include manufacturer-recommended servicing and any repairs needed to keep the vehicle in good operating condition.

Maintenance lease -- A lease agreement in which some or all of the vehicle maintenance and servicing is the responsibility of the lessor.

Mileage allowance or mileage limitation -- The fixed mileage limit for the lease term. If you exceed this limit, you may have to pay an excess mileage charge.

Money factor -- A number, often given as a decimal, used by some lessors to determine the rent charge portion of your monthly payment. This number is not a lease rate and cannot be converted to a lease rate by moving the decimal point.

Monthly payment -- This term may refer to one of two required federal disclosures.
See Base monthly payment and Total monthly payment.

Monthly sales/use tax -- The state and local taxes that you must pay monthly when you lease a vehicle. These payments, if any, are added to your base monthly payment and paid as part of your total monthly payment.

MSRP -- Manufacturer's Suggested Retail Price, sometimes called the sticker price.

Nonsegregated disclosures -- Disclosures required by Federal Reserve Regulation M that may be presented in any order and may appear anywhere in the lease documents except with the segregated disclosures. See also Segregated disclosures.

Open-end lease -- A lease agreement in which the amount you owe at the end of the lease term is based on the difference between the residual value of the leased property and its realized value. Your lease agreement may provide for a refund of any excess if the realized value is greater than the residual value. In an open-end consumer lease, assuming you have met the mileage and wear standards, the residual value is considered unreasonable if it exceeds the realized value by more than three times the base monthly payment (sometimes called the "three-payment rule"). If you believe the amount owed at the end of the lease term is unreasonable and refuse to pay, the lessor may attempt to prove that the residual value was reasonable when it was set at the beginning of the lease. However, if you cannot reach a settlement with the lessor, you cannot be forced to pay the excess amount unless the lessor brings a successful court action and pays your reasonable attorney's fees.

Option to purchase -- See Purchase option.

Payoff -- See Early termination payoff.

Personal property tax (or Ad valorem tax) -- A tax on personal property. State laws govern whether personal property taxes apply to a leased vehicle; your lease agreement governs whether you or the lessor will pay these taxes.

Prior credit balance (negative equity or negative trade-in balance) -- The portion of the gross capitalized cost representing the amount due under a previous credit contract after crediting the value of the vehicle traded in on the lease.

Prior lease balance -- The portion of the gross capitalized cost representing the balance due from a previous lease agreement after crediting the value of the previously leased vehicle.

Purchase option -- Your right to buy the vehicle you have leased, before or at the end of the lease term, according to terms specified in the lease agreement. Your lease agreement may or may not include a purchase option.

Purchase option fee -- An amount, in addition to the purchase price, you may have to pay to exercise any purchase option in your lease agreement.

Realized value -- (1) The price received by the lessor for the leased vehicle at disposition, (2) the highest offer for the leased vehicle at disposition, or (3) the fair market value of the leased vehicle at termination. The realized value may be either the wholesale or the retail value as specified in the lease agreement.

Reasonableness standard -- The requirement of the Consumer Leasing Act that charges for delinquency, default, or early termination be reasonable in light of the lessor's or assignee's (1) anticipated or actual harm caused by such delinquency, default, or early termination, (2) difficulties in proving loss, and (3) inconvenience in obtaining a remedy.

Rebate -- An amount offered by some manufacturers, dealers, or lessors that may be paid to you separately or credited to your lease agreement.

Reconditioning -- The process of preparing a vehicle for resale or re-lease if you return it.

Reconditioning reserve -- An amount that you may pay at the beginning of the lease that may be used by the lessor to offset any amounts you may owe at the end of the lease term for excessive wear and use and excess mileage. Any remaining amount may be refunded to you.

Registration fee -- A fee charged by a state motor vehicle department to register a vehicle and authorize its use on the public roadways.

Regulation M -- The regulation issued by the Federal Reserve Board that implements the Consumer Leasing Act.

Rent or rent charge -- The portion of your base monthly payment that is not depreciation or any amortized amounts.

Residual value -- The end-of-term value of the vehicle established at the beginning of the lease and used in calculating your base monthly payment. The residual value is deducted from the adjusted capitalized cost to determine the depreciation and any amortized amounts. The residual value may be higher or lower than the realized value at the scheduled end of the lease.

Residual value guidebooks -- Publications used in part by some lessors to establish vehicle residual values. Different guidebooks are more popular in different regions of the United States and with different lessors.

Sales/use taxes -- Sales/use taxes, which vary from state to state, are assessed on both leased and purchased vehicles. There are often differences in what amounts are taxed and when the taxes are assessed. In a lease, sales/use taxes may be assessed on (1) the base monthly payment, (2) any capitalized cost reduction, and (3) in a few states, the adjusted capitalized cost. In most states, the sales/use tax on the base monthly payment is paid monthly; in some states, however, the tax is due at lease inception. Sales/use taxes on the capitalized cost reduction and the adjusted capitalized cost are usually due at lease inception. If you exercise any purchase option, separate taxes may apply.

Security deposit -- An amount you may be required to pay, usually at the beginning of the lease that may be used by the lessor in the event of default or at the end of the lease to offset any amounts you owe under the lease agreement. Any remaining amount may be refunded to you.

Security interest -- If stated in your lease agreement, a lessor's legal right to your property (such as stocks or bonds) that secures payment of your obligation under the lease agreement.

Segregated disclosures -- Disclosures required by Federal Reserve Regulation M that must be grouped together and separated from other information in the lease documents. See also Nonsegregated disclosures.

Service contract or mechanical breakdown protection -- A contract that you may purchase to cover such expenses as the repair or replacement of vehicle components and that may pay for related services such as towing or replacement rental cars. In most cases, service contracts do not cover routine maintenance unless specified in the lease agreement.

Single-payment lease -- A lease that requires a single payment made in advance rather than periodic payments made over the term of the lease. This lump-sum payment may be less than the total amount you would pay were you to make periodic payments over the term of the lease.

Standards for wear and use -- Statements in the lease agreement defining what the lessor means by "normal wear and use" and setting forth the requirements for the vehicle's condition at the end of the lease. Standards may address such things as the amount of tread remaining on the tires at the end of the lease or the type of dents or scratches that are acceptable. These standards must be reasonable.

Sublease -- Oral or written contractual transfer of your right to use the leased vehicle to another person. Such a transfer is usually prohibited without the lessor's approval.

Subvention -- A program or plan in which the manufacturer, the finance company, or the lessor subsidizes certain items.

Termination fee -- See Disposition fee or disposal fee.

Three-payment rule -- See Open-end lease.

Title -- Legal document identifying the owner of the vehicle. The lessor, not you, holds title to the leased vehicle.

Total contractual obligation -- The sum of the capitalized cost reduction, the total of base monthly payments, and other charges due under the lease agreement. The total contractual obligation excludes any security deposit as well as sales taxes and any other fees and taxes paid to a third party. If the total contractual obligation exceeds $25,000, the Consumer Leasing Act does not apply.

Total monthly payment -- The base monthly payment plus monthly sales or use taxes and any other monthly charges.

Total of payments -- The sum of the periodic payments, the end-of-term disposition fee, any "other charges," and all "amounts due at lease signing or delivery," minus refundable amounts such as a security deposit and any monthly payments included in the "amount due at lease signing or delivery."

Trade-in -- The net value of your vehicle credited toward the purchase or lease of another vehicle. If you own the vehicle being traded-in, you sell it to the dealer or lessor. If you are leasing the vehicle being traded in, you are turning in the vehicle (either at the scheduled end of the lease or upon early termination) to the dealer or lessor. The amount credited may be positive or negative depending on the value of the vehicle and any remaining balance on your credit, loan, or lease agreement.

Use tax -- See Monthly sales/use tax.

Used-vehicle leasing -- Leasing of previously owned or driven vehicles.

Walk-away lease -- See Closed-end lease.

Warranty -- A guarantee that the vehicle will function and perform as specified. A warranty usually covers specified mechanical problems during a specified period of time or number of miles.

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