Leasing A Car

Leasing A Car

Leasing can be a great way to drive a new vehicle every few years without committing to ownership—but it’s not for everyone. Understanding the structure of a lease and its long-term cost can help you decide if it’s the right move for you.

How Leasing Works

A lease is a contract that allows you to drive a vehicle for a set period—typically 24 to 48 months—while making monthly payments. At the end of the lease, you return the vehicle or have the option to buy it at a predetermined price.

Pros and Cons of Leasing

Potential Benefits

  • Lower monthly payments than financing a purchase
  • Lower upfront costs
  • Frequent access to newer models with updated features
  • No long-term ownership maintenance concerns

Consider the Trade-Offs

  • You don’t own the car—you're essentially renting it
  • Customizing the vehicle may result in penalty fees
  • You'll be responsible for wear and tear charges
  • Leases include strict mileage limits—exceeding them means extra fees
  • Ending a lease early can come with significant termination costs

What Determines Your Lease Payment?

Here are the five key factors that affect your monthly lease cost:

  1. Lease Term – The number of months in your lease contract
  2. Residual Value – The car’s estimated value at lease-end
  3. Money Factor – Similar to interest rate (multiply by 2,400 to get the equivalent APR)
  4. Mileage Limit – Typically 10,000 to 15,000 miles per year
  5. Acquisition Fee – An upfront administrative charge from the leasing company

Smart Questions to Ask Before You Sign

  • What is the residual value?
    A higher residual value often leads to lower monthly payments. It's based on the car’s projected worth at lease-end.
  • What’s the money factor?
    This is the lease’s version of an interest rate. Multiply by 2,400 to get an estimated APR.
  • How many miles are included?
    Make sure the mileage cap fits your lifestyle. Most leases come with 12,000 miles/year—extra miles cost more.
  • How much is due at signing?
    “Drive-off fees” include taxes, fees, and possibly a down payment. Bigger upfront payments don’t always save money and may not be reimbursed if the vehicle is totaled or stolen.
  • What fees should I expect?
    Ask about:
    • Acquisition fee
    • Disposition (lease-end) fee
    • Security deposit
    • Early termination fee
      Some fees are negotiable—others are not. Get all fee details in writing.
  • What’s the total lease cost?
    Add up your total monthly payments and drive-off costs to understand the real cost of leasing.

Before You Sign: Read the Fine Print

Leases come with terms, conditions, and penalties—so read carefully. Understand your responsibilities for:

  • Vehicle condition
  • Mileage overages
  • Early termination
  • End-of-lease options

Tip: If you’re considering leasing but want flexibility, ask about lease-end purchase options or low-mileage lease programs.

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. We do not endorse or guarantee the accuracy of third-party information.

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