An auto lease is a contract that allows you, the lessee, to use a car for a specified term without having to pay for the entire cost of the vehicle. When you sign a lease, your financial institution (the lessor) buys the car from the dealer, and you make monthly payments to the lessor. At the end of your lease term, you either bring the car back (in pristine condition) and may sign a new lease, or exercise your purchasing option.
Keeping To The Contract
During your lease, it is important to pay close attention to the conditions of your contract. Your lease will specify a mileage allowance, and if you go over it you may be subject to some very hefty fees. If you decide to return the vehicle at the end of your lease, rather than opting to purchase, it is important to make sure the car has been well maintained, has no after-market modifications, and shows no other signs of use beyond normal wear and tear. Make sure you understand what this means as it pertains to your lease, and have the dealer’s definition of “normal wear and tear” in writing before you sign!
Is Leasing Right For Me?
An auto lease generally lasts between 2 and 4 years, so if you like to get behind the wheel of a new car more often, leasing a car may be a great option for you! Other factors to consider when deciding if leasing is right for you are:
• Mileage: A lease will generally allow for 12,000 – 15,000 miles per year, or 10,000 for a high-end luxury car or sports car. If you usually drive less than that, a lease can be a good option.
• Affordability: Often, lease payments will be less than monthly payments for an auto loan. You may also be able to enter into a lease agreement without any upfront costs.
• Responsibility: If you choose to return the vehicle at the end of your lease term, it is important that it not be damaged, modified, or show signs of use beyond normal wear and tear.
Calculating Your Payment
Leases are more complicated than buying a car using saved up cash, or even getting a loan to buy it. So we dedicate a whole page to understanding the elements of a lease payment, and we also have interactive calculators here.