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Questions to ask before leasing a car Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering you interactive financial calculators and tools that provide objective and original content. We also allow you to conduct research and compare information for free to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies that pay us. This compensation could affect how and when products are featured on this site, including, for example, the order in which they be listed within the categories of listing in the event that they are not permitted by law. Our loan products, such as mortgages and home equity and other home loan products. But this compensation does affect the information we publish, or the reviews you read on this site. We do not cover the universe of companies or financial deals that may be available to you.



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6 min read published September 30, 2022
Written by Allison Martin Written by

Allison Martin's work started over 10 years ago as a digital media strategist. She's been featured in a variety of top financial outlets including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.







Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate from late 2022. He values clear reporting that helps readers successfully land deals and make the best decisions for their financials. He specializes in auto and small business loans.









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A car lease lets you rent a vehicle for a few years without having to buy it. It's an excellent option to purchase a new set of wheels without fully committing to a financial commitment. It's especially beneficial for those who drive under 15,000 miles each year and don't have to worry about mileage overages. However, leasing can be difficult. For the best price it is best to be prepared with some questions. Ten questions to ask prior to leasing a car If you're considering leasing a car not settling for the first offer you get. Get yourself set for success by asking these questions first. 1. What is the total amount to be paid at the time I sign the lease? When you sign a lease, you must receive a comprehensive written description of all the fees you are required or likely to pay. The upfront payments may include security deposits, title fees, reduced capitalized cost as well as monthly payments due at signing as well as registration costs. Knowing the amount due when signing off on the lease will help to avoid overspending. Also, knowing the cost breakdown can assist you negotiate more effectively. Key takeaway
The amount you pay on is typically more costly than the price that enticed you So, ask for an estimate of the fees first.


2. How long will the lease last? It is the leasing business that will inform you how many installments the lease covers and how much each one will be , and the time the payments are due. The most popular lease conditions include 24 36, 48, and 60 months however, you could also come across odd terms, like 39 months. The odd-month deals are intended to make you confused. When looking through the lease options, remember that a longer lease offers lower monthly installments, but you'll be paying more . What is the most important takeaway
Be aware of your options prior to agreeing to a lease term and understand exactly how your term will affect the monthly installment.


3. What type of lease do I have to sign and what happens when it expires? There are two : open-end and closed-end. In a closed-end leasing agreement, the leasing company determines the total cost basing on their estimate of the depreciated value of the vehicle. Even if your vehicle depreciates more than expected during a closed-end lease, the only costs you're accountable for are the excess mileage and wear-and-tear fees. The most typical type of lease. In an open-end or finance lease, you will have to cover any difference in the car's residual value and its actual value at the expiration period. If the car's value decreases more than you anticipated, you could face a hefty charge at the close term. In both cases, read the fine print so you are not surprised by any additional end-of-lease charges. What you should take away from this is
Knowing the kind of lease you're entering into allows you to better plan for the amount of payments.


4. What happens if I want to purchase the car at the expiration period of my lease? If you'd like to buy the car, you could have an option to buy it in the amount of the residual value, or purchase price option that is included in the lease agreement. However, before making a purchase, you should check the residual value against the car's retail value to decide if you're receiving a good bargain. Also, assess the vehicle's condition to determine if it's in good shape and hasn't been significantly depreciated. You may find that buying out isn't worth it unless you're dealing with significant wear and tear costs or penalties for over the limit of mileage. What's the most important lesson to take away
The lessor may allow you to purchase your lease when the expiration date comes around, but you should run the numbers to ensure it makes financial sense.


5. What is the residual value of the vehicle? The residual value of a vehicle is the amount it's believed to be at at time of lease. The leasing companies decide on the residual value, though you can obtain an estimate of . This number can be helpful since it's a crucial aspect in determining your monthly payments. The higher the residual value in comparison to the vehicle's initial cost, the less the monthly cost. Additionally, certain manufacturers and lessors provide a subsidy to residual values way to make your monthly payments less expensive. If, for instance, your car is worth $20,000 and should be worth $15,000 at the close of the lease you'll have a lower payment than if you opt for a $20,000 car expected to be worth $10,000. In the second scenario the lessor must recover a higher proportion of the car's worth and will charge you more. Important takeaway
Knowing a vehicle's residual value can help you figure out the type of car and which kind of financing is right for you.


6. Is there a wear and tear evaluation? You should ask your lender to inform you if and how wear and tear will be assessed when you return the car. When you are done with your lease, the vehicle will be inspected for any damage on the exterior, such as scratches, dents and windshield cracks, and the interior, such as staining. You will be charged for any damage that is excessive however you will not be required to pay for the inspection. The law also stipulates that the wear and tear standards should be reasonable. The standards are based on the number of miles driven as well as any damage that was done to your vehicle. If your car has minor damage, the cost of touch-ups before your assessment may make sense. The most important thing to remember
Understanding the way wear and tear is determined will prepare you for any end-of-lease payments.


7. What is the money factor? The "money factor" represents the total amount you'll pay in finance charges for the car you've leased. It's equivalent to the rate of interest you'd pay for a brand new car. It's usually represented as the small decimal. Then, multiplying it by 2,400 will reveal the annual percentage rate you are paying for the lease. To illustrate, if approved for a lease with a factor of .0030, it's equivalent to an annual interest charge that is 7.2 percent. Your credit score has a significant impact on the factor of money, so you should consider this before heading into the leasing office, you should be aware of your credit score. You can rarely bargain on this amount since the lending institutions usually determine it. It is the most important lesson to take away
A money factor isn't the same as an APR, however, it will decide how much you'll be charged on top of the lease amount.


8. What is the mileage allowance for leases and what happens if I exceed it? The lease mileage allowance is the amount of mileage you can drive without having to pay additional charges. Leases usually allow either 12,000 or 15,000 miles before fees kick in. The fees for excess mileage vary between 10 and 25 cents per mile. This adds up quickly. Know your allowance for mileage and be aware of your driving habits throughout your lease. Any long-distance road trips could cost you. While the mileage allowance is usually a negotiated number, changing it can affect your monthly payment. Important takeaway
If you exceed your lease mileage allowance, it is going to cost you.


9. What happens if I can't make a lease payment? Although few plan to fall in debt on lease payments, it is important to be aware of what might be the consequences if you don't make the payment. A default typically will occur when you do not make more than three payments in the same row. The inability to pay your lease usually leads to and negatively affects your credit score. However, every lessor deals with this differently. A lot of companies offer grace periods that you must inquire about prior to you sign the lease. It is also important to ask about a worst case scenario where you default. After a specific amount of time, the lessor can and often demand an early cancellation fee. Before signing, find out the price. Key takeaway
Each lender handles default in a different way So, make sure to inquire prior to time what penalties could occur.


10. Can the lease be extended? It is possible to extend your lease for some months at the same cost, but the majority of lessors have a limit. Even if you're not certain whether you'll need for an extension of your lease ask whether the extension will alter the terms of the initial lease, or if it could result in additional cost. Knowing upfront the costs involved can assist you in planning your budget the time when your lease is due to expire. In addition to the possibility of lease extensions, you should inquire about the fees for termination. Businesses must be clear about the conditions the leasing company may request the return of their vehicle or alter conditions of the agreement. It is a key takeaway
Asking about lease extensions ahead of time can ensure that you aren't blindsided with extra costs should you require more time at the end of the lease.


Last considerations to bear in mind prior to leasing an automobile could be an excellent option for drivers interested in driving the newest vehicle options without investing in buying an automobile. Here are some pros and cons to bear in mind while . Pros Leasing can be cost-effective. People who don't travel a lot and don't need to go over the limits of their lease's mileage may find leasing a much cheaper option than buying the new car. You can get a new car every few years. If you are a fan of driving latest vehicles with the newest technology, a lease allows you to upgrade every few years when your contract ends. Cons Leasing involves restrictions you don't have when buying cars. If you lease a car, you will face limits on the number of miles you travel. It's also essential to maintain the vehicle in good condition so that you don't incur additional costs after the lease ends. There is no way to build equity when leasing an automobile. If you switch between leases, you're not creating any equity in the vehicle. Before visiting a dealer to ask questions about leasing, consider your driving habits to see whether leasing is the best option for you. A is a great starting point to see potential savings. The next steps are leasing a car. is a big commitment, but it can pay off If you know the risks involved. It's important to prepare. Ask the right questions and read the details of the lease agreement to ensure you get the most favorable deal. Learn more


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Written by

Allison Martin's work began over 10 years ago as a digital media strategist. Since then, she's been published in several leading financial outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.



Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since the end of 2022. He values the clarity of his reporting, which helps readers confidently find deals and make the best choices for their money. He is a specialist in small business and auto loans.











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