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Guide to Understand Car Leasing

A Simple Guide to Understand Car Leasing

With a better understanding of leasing a car, you can make an informed decision as well as saving money on a car lease.

Leasing lets you drive your dream car. It is just like renting a car for a specific period. From luxury large SUVs to subcompact cars, you can lease almost any vehicle.

Guide to Understand Car Leasing

The leasing cost includes depreciation, interest, and fees. While it may seem a straightforward process, it can be just the tip of the iceberg as many things are included.

However, you can make the most of it if you know how to do it rightly, especially if you are a beginner.

Here we will educate you on the leasing process so that you can have a sense of how leasing a car works.

Leasing a Car vs. Buying a Car—what’s the Difference

Well, this is no brainer.

When you purchased a vehicle, you have to pay the entire price of the vehicle using cash, loan, exchange or a combination of all three.

Talking about car leasing, you have to pay for the difference between the vehicle’s price and its expected value at the end of the lease, along with fees and interest.

For example, the cost of a sedan is $50,000, and it’s supposed to be worth $40,000 after three years. Leasing it means you have to pay for the $10,000 in expected depreciation with fees and interest. It simply means you are paying for the decreased value of a car over the leasing duration. Buying it means you have to pay the full $40,000 with fees and interest.

You have to return the vehicle to the dealership once the lease term is over. You won’t be deemed as the owner of the vehicle as the title is with the leasing company. There will be certain rules or limits regarding the usage, mileage, maintenance, and condition of the vehicle.

Understanding the Important Car Leasing Terms

Car leasing can be confusing just because of its jargons that are different than terms associated with buying a car. Here are some important terms to know:

Cap Cost:

Also known as the capitalized cost, it is the price of the vehicle. And you can negotiate this price just like you will while buying a car.

Cap Cost Reduction:

Anything that lowers the price of the vehicles is termed as a cap cost reduction. It can be the value of a trade-in, auto deal, or a down payment. Cap cost reductions reduce your monthly lease payments, the amount due at signing, or both.

Residual Value:

It is the estimated value of a car at the end of its lease or at the end of its useful life. The residual value is determined by independent companies who specialize in estimating the value of automobiles. It will be mentioned in your lease documents, though it can’t be negotiable.

Lease Term:

It is the period of time the car is leased for. The typical lease lasts two to three years.

Money Factor:

Investopedia defines money factors as “the financing charge a person will pay on a lease. It is similar to the interest rate paid on a loan, and it is also based on a customer’s credit score. It is commonly depicted as a very small decimal.”

Simply put, it is the interest rate you pay during the lease term.

Security Deposit:

A security deposit is required by the leasing company to protect themselves in case of damaging, excessing the mileage or default on a contract. You will get your security deposit back if your lease doesn’t include extra expenses.

Due at Signing:

This indicates that how much amount you have to pay while signing the lease contracts.

Mileage Cap:

It defines how many miles you can have on the car when you return it to the dealership.

Buyout Price:

It is the amount on which you purchase the car for at any time during the contract.


The lessee is the person who leases the car from the company that is lessor.

So you must have understood how leasing a car works. At WWA, we provide your dream cars on lease, from Cadillac, Porsche, Ferrari to mid-range like Nissan and Toyota. Our leasing rates are flat, affordable and transparent. Waiting for you at one of the car dealerships in Brooklyn!

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