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# Main Costs Associated With Leasing a Car

Leasing a car simply means that you rent a car from a dealer for a certain period of time or number of miles in exchange for monthly payments.

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Leasing a car simply means that you rent a car from a dealer for a certain period of time or number of miles in exchange for monthly payments. At the end of the lease agreement, you have to return the vehicle or you can buy it. In order to lease a car, you need to have good credit, which should be on average 724. You should also understand that your lease payment history will be reflected on your credit reports.

The type of vehicle, its estimated depreciation, taxes, rent charges are all the factors that influence the cost to lease cars. In the vast majority of cases, loan payments for a vehicle are more expensive than lease payments. It can be explained by the fact that you will pay for the depreciation of a car instead of its full purchase price. Before deciding whether a car lease is the best option for you, it is essential to have a clear understanding of all the costs associated with it.

## Determination of lease payments

Calculating the monthly payment when you take a loan is quite easy. You just have to add the amount you are borrowing to the interest rate and divide it by the number of months in the loan contract. When it comes to lease payments, the situation is a bit different. In this case, monthly lease payments are based on the car’s residual value or in simple terms, its expected value at the end of lease agreement.

Therefore, if you want to calculate the monthly payment of a car lease, you will have to add the expected depreciation during the lease (minus any down payment), rent charge, taxes, and fees and divide it by the total number of months of your lease terms. For instance, if the expected depreciation of a vehicle is \$15,000, including taxes, fees, and rent charges, and the duration of your lease agreement is three years, then your monthly payment would be \$417.

## Average monthly payment

According to a recent study, the average cost of a car lease for three years is \$450 per month. It is approximately one hundred dollars less than an average loan payment for a vehicle, which accounts for \$554. Due to the fact that the monthly lease payment is determined by the expected value of a vehicle by the end of the lease agreement, the type of the vehicle has an enormous effect on the cost of a lease.

## Car lease fees

When leasing a car you will get exposed to other payments apart from average monthly lease payments. These costs might occur when you sign the lease agreement or when you return the car at the end of the lease contract. A dealer will make you acquainted with whether the aforementioned costs will be on your side.

## Down payments

When leasing cars, some dealers might require an upfront payment. This may be reflected in the first or last monthly payments as well as a security deposit. Dealers normally do it in order to secure themselves in case if you fail to make a monthly payment or cover the cost of end-lease-payments. Some companies might even charge you an acquisition fee. It means that you will have to pay the administrative cost of processing all documentation such as verifying the car insurance package or pulling your credit reports. A state where you live might also have an effect on your monthly lease payments. During the process of signing an agreement, you might be responsible for paying taxes. However, you will have a chance to transfer these taxes into your monthly payments. If you decide to do so, you will get exposed to additional rent charges, which will increase your monthly payment.

## End-of-lease costs

During the process of returning a vehicle, you might get exposed to additional fees. In the vast majority of cases, leasing a vehicle involves mileage restrictions. Generally, you will be allowed to drive around 10,000 to 15,000 miles per year. In case if you exceed that limit you will be charged approximately 10 to 25 cents per mile. If you do not maintain a vehicle or do it poorly you will have to pay the fee for excessive wear and tear. Your lease contract will normally state what is accessible to wear and tear. If you return a car that does not meet these conditions you will be charged for that. There is also a cost associated with disposition. Some dealers include this fee in order to cover the cost of preparing the vehicle for the next sale after you return it. Besides that, returning a car before the lease agreement ends will lead to extra costs for you.