Leasing a car means paying to use a vehicle for a fixed period — typically 24 to 36 months — without owning it. Your monthly payment is based primarily on the vehicle’s depreciation during the lease term. At the end, you return the car or buy it at a predetermined price.
Leasing is essentially a long-term rental agreement structured by a financing company.
How Car Leasing Works
When you lease a vehicle:
You agree to a fixed lease term (usually 24–36 months)
You choose an annual mileage limit (commonly 10,000–15,000 miles)
You make monthly payments based on depreciation and finance charges
You maintain required insurance coverage
Your payment is primarily based on:
Depreciation: The difference between the vehicle’s price and its projected value at lease end
Residual Value: The estimated value of the vehicle at the end of the lease
Money Factor: The lease equivalent of an interest rate
