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Smart Buy Terms and Definitions
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In Other Words |
| SMART
BUY RECIPIENT |
The person who agrees to pay for the use of the vehicle
for the term of the Smart Buy, and to whom the Smart Buy
provider grants
the use of the vehicle. |
That's
you, the person who'd like to get a new car. |
| SMART
BUY PROVIDER |
The
person or business who arranges the Smart Buy, offers the
Smart Buy or Smart Buys the vehicle. The retailer or dealer is
usually the Smart Buy provider, but they can and frequently do assign
the "Smart Buy right" to the financing source (bank or credit
company). In that case, the bank or credit company becomes
the Smart Buy provider. |
The
retailer, bank or company who offers you the car. |
|
CAPITALIZED COST |
The capitalized cost is the vehicle price established
by the retailer plus any acquisition fees and other items
included in the Smart Buy, such as any service contracts,
taxes and insurance that will be figured into the monthly
payment. |
The
price of the car and just about everything else that gets
figured into your monthly payment. |
| CAPITALIZED
COST REDUCTION |
The
total dollar amount of any cash payments, rebates, trade-in
allowances or non-cash credit that is used to reduce the
capitalized cost of the Smart Buy and lower the monthly payment. |
Smart Buy-speak
for down payment. |
| RESIDUAL
VALUE |
An
estimate of your vehicle's worth at Smart Buy-end as set by
the Smart Buy provider for the purpose of calculating your monthly
Smart Buy payment. Residual values vary for different vehicle
makes and models, depending on predicted rates of depreciation. |
What
your car might be worth after your Smart Buy is over (in the
opinion of the bank or credit company, at the time the
Smart Buy begins). |
| DEPRECIATION |
The amount charged for the vehicle's decline in value
through normal use and for any other items paid over the
Smart Buy term. This amounts to the difference between the
capitalized cost and the vehicle's residual value. |
The
amount that the vehicle drops in value during the time
you drive it (we are talking "normal" driving here). |
| MONEY
FACTOR |
The cost of money or financing rate, plus administrative
costs and Smart Buy provider profit that the financing source applies
to the un-amortized balance of capitalized cost (less any
capitalized cost reductions) for the term of the Smart Buy.
This cost is figured into your monthly payment. |
The
cost of financing the Smart Buy. It's sort of like interest
on a car loan. |
|
ACQUISITION FEE |
The
fee the financing source charges to acquire the Smart Buy
from the retailer. It can be included in the capitalized
cost or required as cash due at the Smart Buy signing. |
A
bank or finance company fee. |
| MILEAGE
ALLOWANCE |
The
number of miles you are allowed to drive a vehicle under
the terms of the Smart Buy without having to pay additional
mileage charges. |
Nothing
complicated here. |
| GAP
PROTECTION |
When an accident, fire or theft results in the total loss
of a leased vehicle, gap protection ensures the Smart Buy Recipient
is not responsible for the gap between his/her insurance
settlement and the financial obligations of the Smart Buy
agreement (except for the deductible). |
Essentially
a "you won't have to pay for a car you don't have any
more" free card that protects you if your car is totaled
or stolen. |
