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How Much Does It Cost To Lease A Car?

Leasing a car typically costs less than buying a car, at least in the short term, because you aren’t paying toward owning the car. The average car lease payment is less than a monthly payment on a car purchase.
When it comes to the average down payment to lease a car, there really isn’t a standard. Putting some money down will help make the monthly payments lower, but car leases don’t typically require a down payment, which will save you money up front.
Instead of paying interest on the financing (like you would when you purchase a car) the monthly cost of a lease is partially based on something called a “money factor,” which is the finance charge. The lower the money factor, the better. Some dealerships will negotiate and others won’t, so you’ll need to consider the lease costs to determine if you’re getting a good deal.
While leasing is generally lower cost than buying, there are other unique costs to consider, which could make buying a better financial option in the long run.
At Credit Union of Southern California (CU SoCal), we make getting an auto loan easier.
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all of your banking needs.

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How Do Car Leases Work?

Leasing a car is easy once you know the steps and what make leasing different from a car purchase. Leasing a car includes:
  • Identifying the make and model you want.
  • Shopping around and comparing prices from dealerships.
  • Negotiate the price (yes, you can negotiate the price of a leased car!)
  • Completing a loan application, which includes giving the lending company permission to pull your credit and review of your credit score.
  • Deciding the term (number of years) of the lease and choosing the mileage limit.
  • Signing a lease contract agreeing to the lease terms.
For more details check out How Does Leasing a Car Work and is it Ever Worth it?

Benefits Of Auto Leasing

Leasing a car has some distinct benefits and is a great option for people who need a vehicle on a short-term basis, don’t care to own a car, and can adhere to the mileage limits that are a key part of car leasing.
Here are some other leasing benefits:
You Can Drive A Newer Vehicle: The fee structure of a car lease combined with dealer incentives means that high-end and luxury cars are more affordable as a lease.
You May Not Have To Worry About Maintenance: Because a car lease is for a short-term, usually two to four years, you won’t get stuck paying for repairs that are typically needed the older the car gets.
Lower Monthly Payment: Car lease payments are based on a money factor (the cost of financing the car), the cost of depreciation, and the residual value the car will have at the end of the lease term. These lease costs are generally less than the monthly payments required on a new purchased car, for which you pay principal and interest on the financed loan amount.
Tax Benefits: According to, if you lease a car you use in business, you may not deduct both lease costs and the standard mileage rate. You may either:
  • Deduct the standard mileage rate for the business miles driven. If you choose this method, you must use the standard mileage rate method for the entire lease period (including renewals).
  • Claim actual expenses, which would include lease payments. If you choose this method, only the business-related portion of the lease payment is deductible.

What Is The Average Cost Of A Car Lease?

The average car lease payment is influenced by a variety of factors, including the term of a loan or a lease, the amount of money you put down, the money rate charged by the leasing company, the cost and value of the car, as well as its residual value.
According to Experian’s Q2 2020 State of the Automotive Finance Market Report, the average car lease payment is $467.00 per month.
If you are not sure if you should buy or lease, talk to several dealerships and get pricing on both leasing and buying and ask for an “out the door” price for leasing and buying the same vehicle. Dealerships continually offer seasonal promotions and manufacturer lease promotions that can help you get the car you want at a price you can afford.
If you know you drive a lot of miles, you may want to consider a “high mileage” lease if there’s a mile threshold that works for you. This option will cost more money upfront and you’ll need to make sure not to exceed the mile allowance.
However, leasing could save you money in the long run, as you will turn in the vehicle before it needs major repairs that come from high mileage wear and tear.

How to Calculate Car Lease Payments

Car lease payments are somewhat complicated to calculate and are based on several factors. Each dealer and each car you price will have unique costs for these factors:
The Manufacturer’s Suggested Retail Price (MSRP), Selling Price, Capitalized Cost, Residual Value, Depreciation, Term Length, and Money Factor.
CU SoCal can help with how to calculate a car lease payment! 

Car Lease Fees and Expenses

There are some fees and expenses that are unique to leasing a car, including:
Down Payment: Most car leases don’t require a down payment. If you have bad credit you may be required to make a down payment.
Acquisition Fee: This administrative fee, charged by the leasing company, is not negotiable.
Monthly Payment: All lease agreements include a monthly payment.
Money Factor: Leased cars still include a monthly interest rate, which is expressed as a decimal amount. To calculate the money factor as a percent, multiply the money factor by 2,400. If the money factor is .003, the interest rate is approximately 7%. According to, a lease deal with a money factor of less than .0017 is a good deal — this equals 4.08%.
Excessive Mileage: All lease agreements include an annual mileage allowance or limit — such as 10,000, 12,000, or 15,000 miles. If the annual allowance is exceeded during the lease term, you will have to pay a penalty fee (typically $0.15 to $0.30 per mile). Driving more miles reduces the value of the vehicle and the leasing company charges a fee to cover that loss.
Disposition Fee/Return Fee: This fee is paid at the end of the lease term. It covers the leasing company’s costs of cleaning and repairing the car and preparing it for re-sale. Some dealerships will waive this fee if you decide to purchase the car or you choose to lease or purchase a new vehicle.
Maintenance: The lessee of the car is responsible for maintenance and any damages to the car. While some lease agreement may cover basic maintenance including oil changes, be sure to carefully review and understand your responsibilities before signing a lease. If the car is found to have excessive wear and tear at the end of the lease term, you could be charged a fee for repairs, over an above the disposition fee.
Gap insurance: If a leased vehicle is totaled in an accident or stolen and not recovered, gap insurance covers the difference or “gap” between the depreciated value of the car and what you still owe. Gap insurance is an optional policy you can purchase through your auto insurer, but is sometimes included in a lease agreement. Be sure to ask the leasing company before you purchase this added insurance.

Is Leasing A Car Worth It?

While it’s exciting to purchase a car and think of it as your own, the truth is, if you are purchasing a car with a loan, then you don’t actually own it until the loan is fully paid. During this time the car will depreciate and then you own an older car that is less valuable. However, a car paid in full is an asset that can be used as collateral for attaining other loans, or sold or traded-in.

Many people prefer to lease because leasing allows them to have a brand new car at the end of every lease term (generally two to three years), and there’s no need to worry about big repairs or maintenance costs.
Due to the cost structure, leasing generally has lower monthly payments which is why many people are able to lease a luxury car that wouldn’t be affordable as a purchase.
Leasing is a good option if you don’t have a lot of money saved for a down payment on a car purchase or you’re not really sure what make and model car you want to own. In this case leasing is a good interim option. 

Leasing vs. Buying a Car

When you purchase a car using an auto loan, you make monthly payments toward ownership of the car. As you make payments, you gain equity in the car and once the car loan is paid in full, the car is yours to keep.
If you decide you want to get a different car you can sell it or trade it in to a car dealer and receive a trade-in value toward a new car. Buying a car is ideal for people who want to own the car long-term and sell or trade it in at some point. One downside of owning a car long-term is you’ll pay for repairs after the warranty expires.
A lease is a limited-time agreement, usually two to four years, during which you use the vehicle. When the lease ends, the vehicle must either be returned to the leasing company or purchased for the residual value.
Learn more at Pros and Cons of Leasing Vs. Buying a Car

Used Car Leasing vs. New Car Leasing

Leasing a used car or certified pre-owned car can save you money in monthly payments, however, this benefit is offset by potential problems mechanical problems that come with driving an older car and higher costs, including paying a higher finance rate and paying more for auto insurance.
Talk to the car dealer about your options and compare the “out the door” cost of leasing a used car compared to leasing a new car. If you time it right, you could find manufacturer incentives and promotions that make leasing a new car a better and less expensive option.
Think about why you are considering leasing a used car. Is the make and model you want not available as a new lease or new car purchase? Is a used car lease just more affordable for your budget? If you only need the car for a year or two, leasing used could work in your favor and save you money, while you save up for a new car lease or new car purchase. 

CU SoCal Auto Loans

If leasing isn’t right for you and you decide on purchasing a new or used car, CU SoCal can help with car loan financing! We offer:
  • Up to 120% financing for new and used vehicles.
  • Competitive rates
  • Quick pre-approvals.
  • Extended terms up to 84 months for the lowest possible monthly payment.
  • A personal auto-buying concierge service.
  • Low-cost loan protection add-ons.
  • No application or funding fees. 

Why Savvy Consumers Choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including car loans, personal loans, mortgages, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation consultation with one of our auto loan experts.
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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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