Financing buys the whole car over time; leasing rents the car's best years. A lease payment covers the vehicle's expected depreciation plus a finance charge, which is why lease payments run lower than loan payments on the same car, and why you own nothing when a lease ends.
Capped (often 10,000 to 15,000 per year, overage fees apply)
Wear and tear
Your business
Excess wear charged at turn-in
Customizing
Do what you like
Must return to stock
Equity
Builds as you pay
Usually none, though a buyout below market value can create some
Best horizon
Keep cars 5+ years
Want a new car every 2 to 3 years
The fine print that surprises people.
The money factor is an interest rate in disguise. Multiply it by 2400 to see the approximate APR you are paying inside the lease.
Turn-in day has a bill: disposition fees, mileage overages, and wear charges can add up right when you thought you were done.
Lease-end buyouts got restrictive. Many manufacturers' finance arms now generally require you to buy out or trade your leased vehicle through their own brand's dealers rather than any dealership. Rules vary by lender and change; verify yours before counting on a third-party buyout.
Insurance requirements run higher on leases, and GAP-style coverage is often built into the lease itself.
Quick rule of thumb: if you drive predictable, moderate miles and always want a car under warranty, leasing can fit. If you keep cars long, drive a lot, or want to be payment-free someday, financing usually wins the math.
Lease or finance, on your numbers.
Type your own numbers and see the same car priced as cash, as a loan, and as a lease, with the taxes and state fees for Arizona. Nothing you type leaves this page.
An estimate on the numbers you type, not an offer of credit or a quote from any dealership. Starting loan rates are Rateous's rates for each credit range and term; they are not an offer from any lender. The residual and money factor are the ones you type for your car, and the acquisition fee starts at an example figure; the leasing company sets the real ones. The documentary fee starts at an example figure, the state's legal cap where it has one or $599 where it does not, not any dealership's fee; each dealership sets its own. Taxes and state fees are estimates for Arizona; the dealership's paperwork and your motor vehicle agency have the final numbers. What you own at the end assumes the car is worth the residual. Nothing you type is sent, saved, or used to check your credit.
Quick answers.
Why is a lease payment lower than a loan payment?
You are only paying for the part of the car you use (its depreciation during the lease) plus a finance charge, not the whole vehicle.
Can I trade in a leased car like an owned car?
Sometimes. It depends on the leasing company: many captive lenders now restrict third-party dealer buyouts, so your options may be limited to that brand's dealerships. Check your lease contract and ask the dealership or the leasing company before you shop.
Is leasing throwing money away?
Not inherently: you are paying for use, like any rental, often with lower payments and constant warranty coverage. It is only a bad deal when the mileage caps, fees, or your habits do not match the contract.