Auto lease.

In plain English

An auto lease is an agreement to drive a car for a fixed period (often two to four years) and a set mileage limit, paying mainly for the value the car loses during that time rather than buying it outright. Your monthly payment is based on the difference between the car's price and its predicted value at lease-end (the residual value), plus a finance charge and taxes. At the end you return the car, owing nothing more if you stayed within the mileage and condition terms, or you may have an option to buy it. Going over the mileage limit or returning it with excess wear means extra fees.

01Why it matters

A lease usually means a lower monthly payment than buying, but you never build ownership, and over many years of back-to-back leases you can pay a lot and own nothing.

02The math, step by step

You lease a 30,000 dollar car with a residual value of 18,000 dollars over three years. You are roughly financing the 12,000 dollar difference plus a finance charge and taxes, spread across 36 payments. Drive more than the mileage limit written into your contract and you owe a per-mile penalty when you turn it in.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.