Leasing Explained

What is Leasing?

Simply put, leasing is paying for the use of a vehicle, instead of being stuck with the full cost of the vehicle. Rather than financing the full price plus taxes, you pay for the predetermined difference of the sale price minus the residual value (or option to purchase amount). When you lease, you get more vehicle for less money.

The reality is most of us budget for a vehicle payment every month and leasing allows you to drive a vehicle without most of the long term maintenance costs associated with owning. Wouldn’t it be nice to have a new vehicle with a manufacturer warranty every 24, 36, 48 or 60 months? You make the choice that meets your needs.

Here’s how it works

While all vehicles don’t depreciate evenly, the basic concept of leasing is that you pay the depreciation and interest on a monthly basis for the use of the vehicle.

Say you lease a $20,000 vehicle for three years. At the end of the lease, the vehicle will have depreciated (decreased in value) to $10,000. This would mean that you have used up $10,000 of its value. Divide this $10,000 by 36 to determine the monthly depreciation cost of the vehicle.

When you lease, you also pay interest, tax, and license fees on the transaction.

Is leasing right for you? It really depends on your lifestyle, tax situation, and your preferences. We have summarized some of the key points in the sections that follow.

NVL - Automotive Leasing and Financing