Like a loan, a car lease can come from the automaker or a third-party lender, and it's usually arranged through a car dealership. You also may be able to arrange a lease yourself through an independent bank or finance company. Just as with a loan, you can get prequalified for a lease, and it makes sense to do that, if only to form a basis for negotiation with the car dealer.

The cheapest deals you'll find are subsidized leases offered by the automakers' own finance arm—Ford Motor Credit, Ally (which handles financing for GM and Chrysler products), Honda Finance, and so on.

Subsidized Leases

Automaker leases are sometimes subsidized, or "subvented." The automaker can take money off the top, with an extra rebate just for lease deals, or it can raise the residual, or both. Either way, that reduces the depreciation that the lease must finance. Occasionally a subvented lease can bring a below-market money factor, but that's uncommon. You can unearth these special lease deals by checking the automakers' and local dealers' websites.

Be aware, though, that a lot of these leases are cheap because the automaker is trying to clear the decks of slow-selling cars. So that sweetheart deal is probably not on a car you actually want. The special deals may be available only to customers with top credit scores. But with lending standards looser than they were a couple of years ago, don't assume you won't qualify.  

Whether you're comparing leases or evaluating a single offer, pay particular attention to the lease interest rate, aka the "money factor." This is a small decimal fraction, often written out to five places, such as .00166.

To convert a money factor to its equivalent percentage rate, multiply it by 2,400. Thus, a money factor of .00166 multiplied by 2,400 is the same as a 4 percent annual percentage rate. To go the other way, divide by 2,400. An 8 percent APR would convert to a money factor of .00333.

Lease rates are often lower than an equivalent loan's interest rates. Among other things, lease contracts are less risky for a finance company. Because the finance company legally owns the car, it's easier to repossess it if push comes to shove.

If the lease rate you're being offered is more expensive than a loan rate you could get, try another leasing company or a different dealer. Keep in mind that lease rates, like those for loans, depend on your credit score. But different lenders have different standards.

You may be able to arrange a lease yourself or compare lease offers through online sources such as or Credit Union Leasing of America (

Read Lease Ads Carefully

Many people assume that when they see a monthly payment printed in a leasing ad, the figure is etched in stone. But that monthly figure may be based on the manufacturer's suggested retail price, which can be negotiated downward just as if you were buying the vehicle. Here's what else to watch out for:

  • What equipment? Some of those ultra-cheap lease offers apply to only a handful of cars on hand, which may be strippers devoid of desirable features.
  • Act fast? A careful shopper needs time to visit dealers and weigh competing offers. But to qualify for the attractive terms in some ads, the customer has just one day to sign the lease and must take delivery of the vehicle within three days after that. Don't let yourself be rushed.
  • Minimal mileage allowances. Some lease ads base their offers on an allowance of 10,000 miles or less—pretty skimpy for most people. Of course, if you exceed that limit, you'll have to pay an extra charge for each additional mile.
  • Signing paperwork. Even before you sign your lease contract, you should be thinking about how you want to handle the end of your lease. The contract will spell out conditions you'll be expected to meet when it comes time to return the vehicle, so now is the time to decide whether you can live with those terms.
  • Early termination penalty. Usually, if you terminate the lease early, the penalty can pretty much equal the rest of the lease payments. So before you sign, make sure the payments will fit into your budget for the entire term.

Choose the Right Mileage

As we've said, if you exceed the mileage limitation in the lease, you could end up paying as much as 50 cents for each additional mile you drive. If you think you may need additional miles, you're better off purchasing them at a discount before you take possession of the vehicle.

Sometimes you can do that during the lease, but ask about it first. The savings can be significant, because most companies will let you boost your mileage limits for about 10 to 15 cents per mile. On the other hand, don't buy more miles than you're likely to use.

Last, keep in mind that the more miles you drive, the greater the potential for more wear and tear. You'll be charged for this at lease-end. So find out what the dealer considers "excessive" wear and tear before you sign the lease.

Make Sure It's a Closed-End Lease

Most consumer leases are closed-end leases, meaning that you can walk away at the end without having to pay the finance company anything if the vehicle loses more than its projected depreciation and disposition fee.

Examine the Purchase Option

The standard lease-end purchase option lets you buy the vehicle for its stated residual value when the lease is over. Check whether there are any extra fees associated with doing that. If you like the vehicle and decide you do want to buy it, make sure that the stated price is a good value. Sometimes, the carmaker or leasing company offers a lower interest rate for the loan and/or cheaper warranty/maintenance program extension for lease-end buyers.

When the Lease Ends

If you let your guard down, a satisfactory leasing experience can quickly unravel—expensively—at lease-end. Because you're giving up your wheels, the dealer knows that you'll probably need to get into another car. A dealer might try to strengthen his hand by telling you that you will be charged for excess wear and tear, then offer to forgive those charges if you agree to lease a new vehicle.

If you drove too many or too few miles, investigate whether it makes sense to buy the vehicle at the purchase-option price, then either keep the car or resell it. To decide, you need an accurate estimate of what the vehicle is now worth.

If you drove too few miles and thus paid too much depreciation, buying the vehicle is a way of recovering that value.

If you drove too many miles, buying the vehicle may leave you better off than paying the over-mileage penalty. The same is true if you have excess wear and tear.

Last, if you had a subvented lease with an artificially high residual value, there's a good chance you'd be better off walking away. The purchase price may very well be higher than the vehicle's worth.

Here are some other ways to minimize expenses:

  • Turn it in clean. Before you bring the car back, make sure it looks as sharp as possible: cleaned and vacuumed.
  • Have an independent garage fix your vehicle, if necessary. You're under no obligation to have the dealer that originally leased you the car do any of the needed end-of-lease repairs. At least one or two months before your lease expires, have the vehicle inspected. If repairs are needed, collect bids from mechanics or body shops you trust to determine the least expensive way to make them.
  • Buy your own tires. If you need to replace the tires, you can do it less expensively with a bit of shopping rather than just going through the dealer. Expect to pay for all four. Most leases specify that tires must match; mismatched tires are also a safety concern.
  • Be aware of "loyalty" leases. Dealers like nothing better than to persuade existing lease customers to simply roll into a new lease when their contract expires. But you owe it to yourself to shop as carefully for your new lease as you did for the original one. If you decide to lease anew from your original dealer, make sure that any forgiven end-of-lease charges aren't simply "wrapped" into the next lease you sign.
  • Get your security deposit back. Many leasing companies require customers to ante up the equivalent of one or two months' payment as a security deposit when the initial lease is signed. If you have a good credit history, ask the dealer to waive that fee. If you do have to pay it, though, don't forget to ask for your deposit back when you return the vehicle.
  • Early exit. If you must terminate early, one option is to work through a service such as or For a fee, they will help find someone to take over your lease. Many lease companies charge a transfer fee or even prohibit lease transfer, so check first.