Glossary

Here's some common terms that may help you in your next car-buying decision.

Adjusted Capitalized Cost

The difference between the gross capitalized cost and the capitalized cost reduction. This is the amount used to calculate the lease payment.

Amount Financed

The agreed upon sale price of the vehicle, plus any charges for taxes, title, license fees, service contracts and insurance, less any down payment and/or net trade-in allowance. This is the amount which is subject to finance charges.

Annual Percentage Rate (APR)

The total amount of finance charges expressed as a true percentage of the declining unpaid balance.

Balloon Contract

A loan that is amortized only down to the expected end-term value with a remaining balance to be paid in a lump sum at the end of the term.

Balloon Payment

Estimated final payment which covers the remaining expected value of the vehicle.

Capitalized Cost Reduction

The amount of any net trade-in allowance, rebate, noncash credit, or cash which you pay that reduces the gross capitalized cost. This is sometimes referred to as a down payment.

Closed-End Lease

A type of lease in which the lessee is not responsible for the value of the vehicle at the end of the lease. The lessee is liable for excess mileage and excessive wear and use. This is also called a guaranteed trade-in, net lease, or walk-away lease. This is the only type of lease Servco utilizes.

Down Payment

The amount of cash or net trade-in allowance applied to reduce the cash sales price of a vehicle. Most retail transactions require a down payment of 10 to 15 percent of the amount to be financed. However, the required down payment can be less depending on your credit standing, ability to repay, and other criteria. A down payment helps lower your monthly payment as well as establish equity in your vehicle.

Early Termination

When a lease is ended by the lessee returning the lease vehicle to the lessor before its scheduled maturity date.

Excess Mileage Charge

Leases generally contain a mileage limitation to prevent excess mileage from being driven, and therefore, excess depreciation of the vehicle. A set mileage allowance is stipulated in a TMCC lease agreement. If this limit is exceeded, the lessee is charged for each mile driven exceeding the allowable mileage, as specified in the lease (e.g., $0.10 per mile). However, if at lease inception you feel you will be driving more then is set forth in the lease, you can add the anticipated excess mileage (at $.10 per mile) to your lease to be paid as part of your monthly payment.

Excessive Wear and Use

Leases contain specific standards for excessive wear and use based upon TMCC's standards. Included are such items as missing parts, scratches, dents, mismatched/bald tires, cracked glass, ripped/torn/burned interior and inoperable mechanical parts. At the end of the lease, if the lessee does not purchase the vehicle, the lessee must either repair the excessive wear and use, or pay the lessor the estimated cost of repairs.

Gross Capitalized Cost

The agreed upon value of the lease vehicle (including dealer mark-up), plus any items you pay for over the lease term such as taxes, service contracts, insurance, and any prior credit or lease balance.

Lease

A contract between lessor and lessee for a specified time period and a specific payment. The title to the car remains in the name of lessor as owner unless and until the lessee exercises his/her purchase option.

Lessee

The customer who signs a lease with the lessor and pays for use of the vehicle.

Lessor

The Toyota dealer, and after assignment, the financial institution to which the lease is assigned. The party leasing the vehicle to the lessee, the actual owner of the vehicle and the lease (i.e., leasing company, dealer or financial institution).

Manufacturer's Suggested Retail Price (MSRP)

The retail price of the vehicle as recommended by the manufacturer--often called the sticker or list price.

Purchase Option

An option in a lease which allows the lessee to purchase the vehicle at the end of the lease term for a specified price.

Residual Value

The lease-end value of the vehicle set at lease inception by the lessor. It's usually calculated as a percentage of the MSRP. This is used as a component of the payment calculation.

Retail Contract

Contract representing the time sale of a vehicle to a customer.

Refundable Security Deposit

An amount collected by the lessor at the beginning of the lease to ensure the lessee's compliance with the terms of the lease. The security deposit is generally refundable at lease end, provided there are no excess mileage, excessive wear and use charges, outstanding parking tickets, or unpaid lease payments.

Scheduled Termination

The end of the lease term, as called for in the lease. It is also referred to as the scheduled maturity date.

Term: The duration of the retail contract/lease agreement, usually expressed in months (e.g., 24 months, 36 months).

For general information, please contact any one of our Toyota-Hawaii Dealers.

Finance