Question 1

Is it cheaper to lease or buy a car?

Accepted Answer

Over the short term (2-3 years) leasing usually has lower monthly payments and a lower total out-of-pocket cost. Over the long term (5+ years) buying is almost always cheaper because you keep the car after the loan ends and stop paying for it, while leasing means continuous payments forever.

Question 2

How is a car lease payment calculated?

Accepted Answer

A lease payment has three parts: depreciation (cap cost minus residual value divided by term), finance charge (cap cost plus residual times money factor), and sales tax. The formula is: monthly = depreciation + finance + tax. Money factor multiplied by 2400 approximates the APR.

Question 3

What is a good money factor on a lease?

Accepted Answer

A money factor below 0.00125 (about 3% APR) is considered good for buyers with excellent credit. Multiply the money factor by 2400 to convert it to an APR. Many manufacturers offer subsidized lease rates as low as 0.0005 to 0.001 on promotional deals.

Question 4

What happens if I exceed lease mileage?

Accepted Answer

Most leases charge 15 to 30 cents per mile over the annual limit, typically 10,000 to 15,000 miles per year. Excess mileage charges can add up fast — 5,000 miles over at 25 cents each is 1,250. Estimate your real mileage before signing, and buy extra miles up front if needed since they are cheaper than the penalty.

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