Annual percentage rate The interest rate used in the calculation of the monthly lease or loan payment. Balloon payment A large, lump-sum payment scheduled at the end of a series of considerably smaller periodic payments. A balloon payment may be included in the payment schedule for a loan, lease, or other stream of payments. Cap cost reduction This is simply a down payment to reduce the vehicle price or "cap cost" of the vehicle. It can take the form of either a cash down payment or a vehicle trade-in and is applied to the lease at the time of lease signing. A cap cost reduction helps to reduce your monthly payment. Capitalized cost Commonly referred to as the "cap cost", this is the lease price plus any administrative fee and other items included in the lease such as extended service contracts, life, accident and health policies. Closed-end lease A lease arrangement under which you, as the lessee, will have no responsibility to the lessor for the market value of the vehicle at scheduled lease termination, if the vehicle does not have excess kilometres or wear. This type of lease is sometimes called a "walk-away lease". Current market value The value of your vehicle at today's market price. Early termination costs Fees related to administration, excess kilometres, excess wear and tear and all remaining monthly payments. Excess kilometres Any kilometres exceeding the allowed kilometres as outlined in the lease agreement. Excess kilometre charge A charge per kilometer that is assessed for kilometers driven in excess of what is stipulated in the lease agreement. Excess wear and tear Excess wear and tear is evaluated at lease end. Broken or missing parts on the inside and out, poor quality repairs, mechanical and electrical damage, and alterations to the vehicle's appearance all constitute wear and tear. Option to purchase price This is the amount you can pay to purchase your vehicle at the end of your lease. This amount is established up-front when you sign your lease agreement. Gap protection Gap protection ensures that if your vehicle is stolen and not recovered or destroyed in an accident and there is an insurance settlement, you are not responsible for any additional charges other than your insurance deductible, providing that you have fulfilled all of the contractual agreements of your lease prior to the accident or theft. Lease An agreement under which the vehicle owner (the lessor) permits its use by a customer (the lessee) for an agreed upon period of time (the term). Lease rate The interest rate used to compute your monthly lease payment. Lease termination report Official notification that you are returning your vehicle. Lessee You, the user of the leased vehicle. Lessor The owner of the leased vehicle. Lien Legal claim or charge against property for the satisfaction of a debt. Normal wear and tear The minor and reasonable wear a vehicle endures during everyday, ordinary operation. Normal wear and tear can include things like small door dings, paint scratches or stone chips. Option to purchase price The amount you can pay to purchase your vehicle at the end of your lease (established when you sign your lease agreement). Provincial personal property security law Every province has legislation dealing with personal property security law. The legislation allows lenders to protect their interest in personal property by registering it in a centralized provincial registry. Purchase finance rate The interest rate used to compute your monthly financing payment. Residual value An estimate of your vehicle's worth at lease-end as set by the lessor for the purpose of calculating your monthly lease payment. Residual values vary by term, usage and for different vehicle makes and models, depending on predicted rates of depreciation. Taxes, costs and expenses incurred if you exercise your option to purchase are extra. Security deposit A refundable dollar amount that you pay at the time of lease signing. This amount can be used by the lessor to pay for all or part of your excess kilometres or excess use charges you may have at lease-end. Term The length of time of a lease or loan agreement. Transfer fee A standard fee charged for transferring your lease to somebody else. Transfer of lease When somebody takes over your lease.