Leasing seems to have a vocabulary of its own. Understanding leasing terms can help you demystify this often confusing process. Here are the key words and their definitions.

Allowable Mileage: This is the number of miles you are allowed to drive over the term of the lease. Often this is stated as the number of miles per year you can drive. Most leasing companies allow 12,000 miles a year. On a three-year lease, that means you can drive a total of 36,000 miles. If the allowable miles are exceeded, you typically must pay between 12 and 15 cents per mile.

Capitalized Cost: Often called the cap cost, this is basically the negotiated price of the car and all the options. This becomes one of several figures used in calculating a monthly lease payment.

Depreciation: This is the amount by which property (in this case, a vehicle) loses its value. In leasing, depreciation is the difference between the new car's cost and the value of the car at the end of the lease (plus tax, interest and various leasing fees).

Drive-off Fees: This is the amount of money you must pay to begin the lease. Typically, this includes various DMV and leasing fees plus a security deposit. Some people who want to reduce the amount of their monthly payments will also make a cap reduction payment. This is cash, paid up front, and it becomes part of the drive-off fees.

Early Termination: This means you want to get out of the lease contract before all your payments have been made. After 24 months of a three-year lease, for example, you might decide you no longer can afford the car, or you are sick of it. So you decide you want to terminate the lease. This is very costly since leasing companies require you to make all the remaining payments and pay a penalty. However, some new Internet companies have sprung up recently to help people sell their leases to someone who wants to step into a short-term lease at lower payments.

Excess Wear and Tear: Most lease contracts have a clause which states that the person leasing the car is responsible for the cost of "excess wear and tear" to the vehicle when it is returned. When cars are used, they will eventually show signs that someone has been in them. What is considered excessive? Check your contract for specifics. But keep in mind that it is important to have the car washed and detailed before you return it. This can go a long way to avoiding having your security deposit revoked or extra charges levied by the leasing company.

Gap Insurance: If your leased car is stolen or totaled in an accident, there might be a gap between what your insurance company will pay you for the loss and the amount you now must pay to the leasing company. If you take out gap insurance (it is included in some lease contracts), this will cover you for this loss. For more information, check out the section on gap insurance in our article, Little Known But Important Insurance Issues.

Lessee: This is the person who has leased the vehicle.