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How leasing a car differs from buying a car
The major way car leasing differs from car buying is that you do not own the car at the end of the lease. When you lease a car, you get to use it but must return it at the end of the lease unless you choose to buy it at that time. Leasing also involves --
Upfront costs when you lease a car may include the first month's payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and other fees, and other charges.
Monthly payments. Monthly lease payments are usually lower than monthly loan payments because you are paying only for the vehicle's depreciation during the lease term, plus rent charges (like interest), taxes, and fees.
Early termination. You are responsible for any early termination charges if you end the lease early. (When you purchase a car you are responsible for any pay-off amount if you end the loan early.)
Vehicle return. You may return the vehicle at lease end, pay any end-of-lease costs, and walk away.
Market value of vehicle. The lessor, not you, has the risk of the future market value of the vehicle. (When you purchase a car, you have the risk of the vehicle's market value when you trade or sell it.)
Mileage. Most leases limit the number of miles you may drive (often 12,000-15,000 per year). You can negotiate a higher mileage limit and pay a higher monthly payment. You will likely have to pay charges for exceeding those limits if you return the vehicle.
Excess wear. Most leases limit wear to the vehicle during the lease term. You will likely have to pay extra charges for exceeding those limits if you return the vehicle.
End of term. At the end of the lease (typically 2-4 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.
