Experts take you through every model step by step to help you decide if leasing is the right option for you.

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How Does Leasing Work?

One of the biggest misconceptions about vehicle leasing is that people compare it to renting an apartment or a house. They think “I’ve paid rent for two or three years on this property and have nothing to show for it. That’s simply not the case. Without a proper understanding, leasing can be confusing. I can assure you that once you understand the basics of leasing a new car, you’ll find it to be a fairly simple process.

“The easiest way to put leasing into perspective is to think of it as financing your new car but having an intermission after two or three years.” – Ed Denby,  Segment Specialist

When you buy a car using a low down payment and use an extended term to finance the purchase, you’ll owe more on the loan than the car is worth until you’re in the fourth or fifth year of the loan. In car talk, you’ll be “upside down” for the majority of your loan. At the end of two, three, or even four years you’ll certainly owe more on the car than it’s worth. If you want to trade cars during this period you’ll have one of two choices: either pay your negative equity out of pocket when you trade your car in or, roll your negative equity into the next car, which digs you into an even deeper hole.

Leasing a car is very different. Each month a portion of your payment pays down the balance owed on the car. You can actually build equity in a leased vehicle at a much faster pace than if you financed the car over an extended period of time. Leasing give you options at the end of your lease term.  First, leasing allows you to turn the car back in if you want something else. At the end of your lease you can buy the car for a predetermined amount set at the beginning of the lease. (Many lenders that lease will offer preferred rates if you buy your off lease car). Also, you can actually sell the car at the end of the lease and make a profit, providing the pre-set residual value is lower than the car’s actual value . Finally, the car is under warranty for the term of the lease-not so with long term financing.

The bottom line is that leasing provides you with more options and traditional long term financing comes with more obligations.


Is the brand or vehicle you’re interested in not listed here? Get quotes from local dealers or research vehicle incentives for the car of your choice. Or call 1-800-CAR-SHOW now and get real-time advice from our segment specialists.