Reference
The vocabulary that shows up on every quote, every contract, and every dealership form. Each entry is plain English plus a one-line note on when it actually matters.
A one-time fee a leasing company charges to write a new lease. Typically $595 to $895 depending on the brand.
It is not negotiable on most captives, but it should never be marked up by the dealer above the lender's published rate. Ask to see the lender's rate sheet.
Also: aftermarket, F&I add-ons
Products and services dealers try to sell in the finance office after the car price is settled — paint sealant, fabric guard, nitrogen tires, etched VIN, extended warranties.
Almost all add-ons cost more from the dealer than retail. Decline everything in the F&I office. You can buy a real extended warranty later for half the price.
The yearly cost of borrowing, expressed as a percentage. Includes the interest rate plus any required loan fees.
A 6.5% APR on a 60-month $30,000 loan adds about $5,200 in interest. Pre-approve at your credit union before the dealer quotes you a rate — the spread is often two points.
Also: salvage title, rebuilt title, lemon-law buyback
Any title with a notation other than "clean," indicating the vehicle was previously totaled, flooded, stolen, or bought back under lemon law.
Branded-title cars sell for 25 to 40 percent less than clean-title equivalents. Insurance is harder to get and most lenders refuse to finance them. Avoid unless the discount makes the risk math work.
The agreed-upon price of the vehicle in a lease. It is the lease equivalent of the purchase price.
Negotiate the cap cost the same way you would the purchase price. Many shoppers focus on the monthly payment instead and overpay by $2,000 to $5,000.
Also: cap reduction, lease down payment
Money paid up front on a lease that lowers the cap cost, which lowers the monthly payment.
Avoid putting cash down on a lease. If the car is totaled in month two, you lose it. Use multiple security deposits instead — they get refunded at lease end.
Vehicle-history reports compiled from state DMV records, insurance claims, and service-shop databases. Carfax is more widely used in the US, AutoCheck is owned by Experian.
Pull the report yourself rather than trusting one the seller hands you. The seller-supplied copy can be stale by months. Carfax for Used Car Listings is free to many credit-union members.
A used vehicle sold by a franchise dealer of the same brand, inspected by the manufacturer, and backed by an extended manufacturer warranty.
A real CPO from a brand like Lexus or Toyota carries meaningful warranty value. "Dealer Certified" with no brand backing is mostly marketing — there is no third-party verification.
Also: freight, delivery fee
The manufacturer's fee for shipping a new vehicle from the factory to the dealership. Set nationally, identical for the same model at every dealer.
This one is non-negotiable. Anyone telling you they "waived destination" is hiding it somewhere else in the deal. Verify against the Monroney sticker.
A fee the leasing company charges when you return the vehicle at lease end and do not buy it. Typically $395 to $595.
Waived in some captive programs if you finance or lease another vehicle from the same brand within a window of the return. Ask about it before you sign.
Also: documentation fee, dealer processing fee
The dealer's fee for processing the paperwork on your car deal. Highly variable: California caps it at $85, New York at class="relative z-10"75, Florida often runs $900+.
Capped by law in some states. If a dealer charges above the cap, ask them to fix the line item. Get the doc fee written into your out-the-door price quote by email before you walk in.
Cash you put toward the purchase price up front, reducing the amount financed.
A bigger down payment lowers the monthly payment and total interest but does not help you negotiate the price. Negotiate the OTD price first, then decide what to put down.
The back-office team you meet after agreeing on a car price. They arrange financing and try to sell add-ons.
The F&I office is where dealers earn most of their per-deal profit. Decline every add-on, decline any rate-bump, and read every line before you sign.
Coverage that pays the difference between your auto insurance payout and your loan or lease balance if the vehicle is totaled while you owe more than it is worth.
Useful if you put little down and the car depreciates faster than you pay it off. The dealer's gap costs $700 to class="relative z-10",200 typically. Your own insurance carrier sells the same coverage for under $250.
The price the dealer paid the manufacturer for the vehicle, before holdback and other manufacturer-to-dealer incentives.
Not the dealer's real cost. Holdback (often 2-3% of MSRP) and manufacturer incentives mean dealers can sell below invoice and still profit. Invoice is a useful reference, not a floor.
The annual miles included in a lease, typically 10,000 / 12,000 / 15,000 per year. Going over costs $0.15 to $0.25 per mile at lease end.
Buy mileage up front if you know you will exceed your allowance — it is much cheaper than paying overage fees. Track your monthly average against your contract.
Also: lease rate, MF
The lease equivalent of an interest rate, written as a small decimal. Multiply by 2,400 to convert to an approximate APR.
A money factor of 0.00125 is roughly 3.0% APR. If the dealer will not put the MF in writing, walk. Some dealers mark up the captive's MF — get it from the manufacturer's site first.
Also: window sticker
The federally required window sticker on every new car. Lists MSRP, destination, EPA fuel economy, NHTSA crash ratings, and standard plus optional equipment.
Tax and registration are not on the Monroney. Required by federal law since 1958. Photograph it before you sign anything.
Refundable deposits, typically in $50 to $500 increments, that lower the money factor on a lease in exchange for cash up front.
Each MSD usually buys you 0.00007 off the money factor. On a 36-month lease with 7 MSDs, that is often $700 to class="relative z-10",000 in interest savings — refunded at lease end. Check whether your captive supports MSDs.
Also: sticker price
The price the manufacturer suggests the dealer sell the vehicle for, before tax, fees, and any incentives.
Most cars in 2026 transact below MSRP. Some hot sellers (RAV4 Hybrid, Land Cruiser, Sienna) still go for MSRP or above. Cross-check MSRP at the manufacturer's site to catch dealer markups.
Also: upside down, underwater
Owing more on your current car loan than the vehicle is worth. Common in the first three years of a 72- or 84-month loan.
Rolling negative equity into the next car loan compounds the problem. The cleanest fix is to keep your current car until you have positive equity, even if it means an extra year of payments.
A federally required statement on the title showing the vehicle's mileage at the time of sale.
Mileage discrepancies between the title and the Carfax service-record history are a red flag for odometer rollback. Verify before signing.
Also: drive-off price, total price
The total amount you will pay including the vehicle price, tax, title, registration, doc fee, and any other dealer fees.
Always negotiate the OTD, not the monthly payment. Get every OTD quote in writing by email before visiting the dealer. See our negotiating guide for the full email playbook.
A loan commitment from a credit union or bank, made before you pick a car, that locks your rate and your maximum loan amount.
Walk into the dealership with a pre-approval. It lets you treat the dealer's rate offer as a quote, not a default. Credit-union rates beat captive-lender rates by 50 to 150 basis points in most markets.
A 90-to-120-minute inspection of a used vehicle by an independent mechanic on a lift, paid for by the buyer.
Costs class="relative z-10"25 to $250. The best $200 you will spend on any private-party or non-CPO used purchase. See our full PPI guide.
The lease company's estimate of the vehicle's value at lease end, expressed as a percentage of MSRP. Higher residuals mean lower monthly payments.
Residuals are set monthly by each captive lender. A car with a 60% residual on a 36-month lease is a better lease deal than the same car at 50%, all else equal. Look up the current month's residual before you negotiate.
Also: yo-yo financing
Taking delivery of a car before financing is fully approved, on a conditional contract. If the lender rejects the deal, the dealer may call you back to renegotiate or return the car.
Refuse spot delivery. Insist on a fully approved deal before keys change hands. The legal protection varies by state and the path of least resistance is to not start the dispute.
Lender-side groupings based on your credit score. Tier 1 (usually 720+ FICO) gets the advertised rates. Each tier down adds 100 to 300 basis points.
Pre-approve before the dealer pulls your credit. Hard pulls from multiple dealer applications can briefly knock 5 to 15 points off your score during the negotiation.
The difference between what your trade-in is worth and what you still owe on it. Positive equity reduces the next car's price; negative equity adds to it.
Negotiate the new car's OTD price first, then bring up the trade. Bundling them lets the dealer hide a low trade behind a "discount" on the new car.
The 17-character serial number unique to every car. Used for title, registration, recalls, and history reports.
Check that the VIN on the dash, the driver's door jamb, and the title match exactly before you sign. Mismatches mean the car has been altered.
Also: extended warranty
A service contract that covers repairs after the factory warranty ends. Sold by manufacturers, dealers, and third parties.
Dealer-sold VSCs are marked up 100 to 200 percent. Buy directly from the manufacturer (e.g. Toyota Platinum, Honda Care) at end of factory warranty if you want one. Skip the third-party VSCs sold by name-brand fronts.