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Learn More About Leasing

Leasing: Hit the road with less hit to your wallet.

What is leasing?

Leasing is simply another way to pay for the use of a vehicle. Unlike buying a vehicle—when you commit to paying for its full cost—leasing allows you to pay only for the portion of the vehicle’s lifetime that you will use.

What should you know about leasing?

Leasing can offer you many benefits and options, depending on how you typically use a vehicle. These include:
  • Lower payments.
  • Lower upfront costs (typically the first month’s payment plus a refundable security deposit.)
  • The ability to upgrade to a new car faster.
  • Lower maintenance costs (depending on the provisions of your lease agreement.)

To better understand leasing, you should be familiar with he following terms:

  • Capitalized Cost: The selling price of the vehicle after any cash down payments, trade-ins, or rebates.
  • Capitalized Cost Reduction: Down payment in the form of cash, trade, or rebates.
  • Depreciation: The value lost by a vehicle over the term of the lease. It’s the difference between the Capitalized Cost and the Residual Value.
  • Excess Mileage Fee: A per mile charge for any mileage over the allowance specified in the lease agreement. This fee can be built into the monthly payment or paid at the end of the term.
  • Lessee: The customer that leases the vehicle.
  • Lessor: The leasing company or bank.
  • Purchase option: The opportunity to buy the vehicle at the end of the lease for a predetermined price (it’s Residual Value.)
  • Residual Value: What the lessor determines the vehicle will be worth at the end of the lease. This is also the guaranteed purchase price at the end of the lease, regardless of what the vehicle is actually worth.

How do you determine monthly lease payment?

To determine your monthly lease payments, the leasing company simply subtracts what the vehicle will be worth at the end of the lease (known as the Residual Value) from the selling price. For example:

  Lease Conventional Loan
Selling price $20,000 $20,000
Residual Value $10,000 NA
Monthly Payment Based on $10,000 $20,000

What else should you know?

The terms of a lease agreement can vary widely depending on the type of vehicle, maintenance provisions, the length of the lease term, mileage and other factors.

At the end of the lease, you have three options:

  • Return the vehicle to the bank in good condition and within the mileage allowance stated on the lease contract.
  • Sell or trade the vehicle after paying the bank for the Residual Value. Any additional money is yours to keep.
  • Purchase the vehicle for the predetermined Residual Value, regardless of its actual value.
 

Still have questions? We can help.

  • E-mail us.
  • Call us at 877.672.2265.
    (8:30 am until 7:00 pm CST, Monday through Friday, 9:00 am until 5:00 pm CST, Saturdays, & 10:00 am until 3:00pm CST, Sundays)
  • Stop by your neighborhood branch.