Car Leasing Guide: How to Lease a Vehicle

What is car leasing?

Leasing is a lot like a long-term rental: you agree to a set number of months and a fixed monthly payment. Each month you're mainly paying for the car's depreciation — the value it loses over your term — plus interest on the money the lender used to buy the vehicle.

Know your annual mileage first

The single biggest factor in any lease is how many miles you drive. Your contract caps mileage — commonly 10,000 to 15,000 miles per year — and every mile over that cap carries a per-mile penalty. Estimate honestly, and buy extra miles up front if you need them; it's far cheaper than paying at the end.

What is the money factor?

Instead of an interest rate, leases express financing as a "money factor" (something like 0.00125). Multiply it by 2,400 to get the rough equivalent APR. A lower money factor means a lower payment, and it's tied to your credit — so it pays to know yours before you shop.

Can you negotiate a lease?

Yes — and you should. The vehicle's selling price (the capitalized cost), your down payment and any trade-in value are all negotiable, just like buying. Keep in mind that accepting certain manufacturer incentives can limit what else you're able to negotiate.

How to lower your monthly payment

• Negotiate a lower selling price (capitalized cost).
• Put more money down, or negotiate a higher value for your trade-in.
• Choose a vehicle that holds its value — stronger resale means lower payments.

Who pays for maintenance and insurance?

During the lease you're responsible for routine maintenance per the owner's manual, though many new cars include free scheduled maintenance for a while. You also carry insurance, and the lender sets the minimum coverage. At turn-in, an inspector checks for damage beyond normal wear and tear — anything excessive is billed to you.

Can you get out of a lease early?

A lease is a binding contract, so ending it early usually means a penalty. Your options include transferring the lease to another driver, or — in a tight used-car market — trading it to a dealer if you have equity. Talk to us before you decide; the right move depends entirely on your numbers.

How credit affects leasing

Lenders check your score and history to set your approval and money factor. Stronger credit means lower payments; a lower score may mean a larger first payment or a higher rate. Leasing generally asks for slightly better credit than financing, because you build no equity in a leased car.

Key leasing terms to know

• Acquisition fee — charged by the lender to set up the lease.
• Capitalized cost — the agreed selling price plus any rolled-in fees.
• Cap cost reduction — anything that lowers it, like a down payment or trade-in.
• Depreciation — the value the car loses over the term.
• Disposition fee — a charge to process the vehicle at lease end.
• Money factor — the lease's version of an interest rate.
• Residual value — what the car is worth, and what you'd pay to buy it, at lease end.
• Term — the length of the lease.

How long do leases last?

Most leases run 24 or 36 months, though 39-, 48- and even 60-month terms exist. As with a loan, a longer term lowers the monthly payment. And if your next car isn't ready when the term ends, most lenders will extend month-to-month.

Ready to lease?

Understand the terms, choose a car that fits your budget and mileage, and get pre-approved — that's really all it takes. Browse our current lease deals and a Simplease specialist will handle the rest, right down to free same-day delivery.