If you lease a car for three years, it’s easy to get a crossover or minivan when the lease is up. ![]() Let’s say you’re newly married and thinking about having kids in a few years. Leasing is also a good choice if you’re not sure what your life will look like in a few years. If you lease for three years, you’ll be able to take advantage of the latest powertrains – and if the new technology proves to be a dud, you won’t need to live with it long term. If you buy a hybrid now, you’ll own it for years and not be able to take advantage of any advances in EV or fuel cell tech. This is particularly true if you’re interested in alternative powertrain technology. Because leases only run for two or three years, you frequently get a new car, and that means you get the best and most up-to-date tech and safety technology in your car. Some lease specials require no money down.Ī lower monthly payment isn’t the only advantage to leasing a car. With a lease, you often only need to come up with one or two thousand dollars at signing. To get the best rate when financing a car, many lenders will want you to come up with 20 percent of the car’s value as a down payment to get the best rate (though no-money-down car loans are available). Leases also typically have less money due at signing – like a down payment – than financing a car does. Because you’re borrowing less money, your payments are lower. Remember, instead of paying for the full price of the car, you only pay for the value it loses during your lease. Make sure you also check out this month’s Best Lease Deals to find incentives on new car leases.įor most people, leasing a car is appealing because it offers lower monthly payments than if you finance a car. Leasing a Car and How to Lease a Car for more details. Still not sure if leasing is for you? Check out Buying vs. You never own it, and when your lease is up you can just walk away from it, with no more lease payments to make. After making payments for the $20,000 over three years, you turn the vehicle back in to the lender. Instead of an interest rate, you’ll be a charged a money factor (which is really the same thing as an interest rate it just has a different name). That $20,000 is the amount you effectively borrows from a lender when you lease a car. Let’s say you’re going to lease it for three years, and over those three years, it’s going to depreciate by $20,000. Let’s take that same $50,000 car from the example above. Depreciation is the decrease in the vehicle’s value due to age and use. When it comes to leasing, you only borrow enough money to pay for the vehicle’s depreciation while you’re using it. You own it, and you don’t make any more payments on it. You make equal monthly payments over a set period of months, and when you’ve made all your payments, the car is yours. That interest rate is how your lender makes a profit. ![]() Your lender will charge you an interest rate, which is a percentage of the money you owe and acts as a sort of rental fee for the money you borrow. For example, if you are buying a car that costs $50,000, you borrow $50,000 to pay for it. When you finance a car, you’re borrowing money to pay for it, and you must borrow the entire price of the vehicle. There are two main differences between a car lease and a car loan: how much of the car’s value you borrow and what happens at the end of the lease or loan term. A new car lease is simply another way of borrowing money to pay for a car. However, if you’ve never done it before, leasing a car can seem confusing. GET STARTED TODAYĭon’t forget you can get pre-approval for a car loan, even if you haven’t decided on the car you want, in case you decide to buy rather than lease.As new cars get more technologically advanced and more expensive, new car leasing has gotten more popular. The money factor is a value you can get from the dealer, or you can divide prevailing new auto loan rates by 24 to use a very rough estimate. The amount of savings, however, depends on some factors, such as the residual value of the car you intend to purchase, the amount of money you pay up front (often called a capitalized cost reduction), and the cost of financing (money factor). This view is a great way to see the amount of savings that leasing may provide. HOW TO USE OUR CAR LEASE VS PURCHASE CALCULATORĪs you change the values on the left, the calculator will show on the right side the difference between the purchase and lease options. ![]() Keep in mind that with a lease, you will have to return the vehicle at the end of the lease term, whereas if you buy, you will own the vehicle and will be able to continue driving it after the term expires. A lease will usually look like a more attractive option when compared to a vehicle purchase when measured over a comparable term as you are only financing the amount of vehicle you “use” during the lease term.
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