If you’re new to leasing, you probably have some questions about how it works. This overview is meant to explain the basics, including the answers to these questions:
What is a lease?
Why do people lease?
What key numbers do I need to know if I’m going to lease?
How can I quickly determine if I’m getting a good deal?
This article won’t cover all aspects of leasing, but it should be enough information to get you started. If you want to get into the nitty-gritty, we’ve got 10 Steps to Leasing a New Car, a comparison of leasing, buying a new car and buying a used car and a deep dive into calculating your own lease payment
What Is a Lease?
Some people think a car lease is nothing more than a long-term car rental. And although that isn’t a completely accurate comparison, it is good enough: A lessee (you) pays money to the lessor (the bank, which is the actual owner) to use the car.
The agreement is set for a certain length of time, usually two or three years. During this time, you’re allowed to drive the car for a set number of miles, usually between 12,000 and 15,000 miles per year. You can raise those limits, but more miles mean a higher monthly payment.