What is leasing a car? Get to know about its Working, It’s Pros & Cons

Car Key with Leasing Tag on White

A car lease is a method of obtaining a new or used car that involves only paying for a portion of the car’s actual cost as opposed to having to pay for the car in its entirety. There are many options regarding leasing a car, for example, you could opt for a business lease if your company provides you with a company car. To put it simply, when you lease a new car you are only paying for the portion of the car you are using over the number of years in your lease agreement.

Infographic created by O’brien Toyota

Car Leasing is a complicated process that involves the agreement that you and the leasing company has signed in order to give you the right to drive your leased car for the specific period of time that the leasing company offers. The payment that you pay monthly to the car leasing company does not make you the owner of the car. So, when you lease a new car, then you are only paying for the portion of the car that you are using for the specific period of time mentioned in the agreement.

Usually the car leasing company offers the lease of three years or less but that depends on your needs and your budget.

Working of the Car Lease:

Many people do not buy their own new car because the leasing car is more benefit able to buying a new car. When you lease a car, you will always have the new car that comes in the warranty of the brand. This methods preferable to those who wants to go with the reliable and the branded cars as compared to owning an old car.

However, when you drive a car for a certain period of time, the market value of the car leased decreases so you have to pay some interest to overcome the loss of value. This is known as the Deprecation process and before signing an agreement, you and your leasing company agree on the interest rate that may be caused by the difference between the value of the car at the beginning and at the end of the lease.

Other thing that is important in the car leasing is the money factor that is actually a tiny percentage or the interest rate that you have to pay for the leased car to the leasing company. That money factor and the deprecation values are summed up and actually determine how much you have to pay for the leased vehicle.

Pros & Cons of Leasing a Car:


  • Lease Payments are lower than the Loan Payments
  • Get a New Car with the Brand Warranty every year.
  • No hassles of repairing at the end of the lease


  • You cannot own a car even by paying.
  • Penalties of interests for wear, tear and mileages.
  • Endless payments
  • Added too much costs

These are the main advantages or disadvantages of Leasing a Car . Please read all the points carefully and think all benefits and losses before leasing a car .