About AutoLeases

Under the federal Consumer Leasing Act, you, the consumer, have a right to information about the costs and terms of a vehicle lease. This information will help you compare lease offers and negotiate a lease that best fits your needs, budget, and driving patterns.

Don't decide to lease a car just because the payments are lower than on a traditional auto loan. The leasing payments are lower because you don't actually own the car.

Leasing a car is very complicated. When shopping, consider the price of the car (known as the capitalized cost), your trade-in allowance, any down payment, monthly payments, various fees (excess mileage, excess "wear and tear," end-of- lease), and the cost of buying the car at the end of the lease.

With prices averaging more than $20,000 for a new vehicle and $9,500 for a four-year-old vehicle, most consumers need financing or leasing to acquire a vehicle. In some cases, buyers use “direct lending:” they obtain a loan directly from a finance company, bank or credit union. In direct lending, a buyer agrees to pay the amount financed, plus an agreed-upon finance charge, over a period of time.

Ownership

LEASING: You do not own the vehicle. You get to use it but must return it at the end of the lease unless you choose to buy it.

BUYING: You own the vehicle and get to keep it at the end of the financing term.

Up-front costs

LEASING: Up-front costs 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.

BUYING: Up-front costs include the cash price or a down payment, taxes, registration and other fees, and other charges.

Monthly payments

LEASING: 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.

BUYING: Monthly loan payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.

Early termination

LEASING: You are responsible for any early termination charges if you end the lease early.

BUYING: You are responsible for any pay-off amount if you end the loan early.

Vehicle return

LEASING: You may return the vehicle at lease-end, pay any end-of-lease costs, and "walk away."

BUYING: You may have to sell or trade the vehicle when you decide you want a different vehicle.

Future value

LEASING: The lessor has the risk of the future market value of the vehicle.

BUYING: You have the risk of the vehicle's market value when you trade or sell it.

Mileage

LEASING: 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.

BUYING: You may drive as many miles as you want, but higher mileage will lower the vehicle's trade-in or resale value.

Excessive wear

LEASING: 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.

BUYING: There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle's trade-in or resale value.

End of term

LEASING: 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.

BUYING: At the end of the loan term (typically 4-6 years), you have no further loan payments.