How to Read Your Motor Vehicle Lease

… and how to know if you’re getting a good deal on financing your new car.

Note: this is the 2nd of a 3-part series on buying versus leasing a new car. Part 1 is here:

To Buy or Lease Your New Car?

There are several advantages to leasing a new motor vehicle, compared with purchasing, but the advice that you get from most finance writers and dealer finance departments is really bad.

The fact is that whether to buy or lease a motor vehicle is one of the most complicated financial decisions that any consumer might face. It’s so complicated, and difficult to decode, that some people simplify the decision by reducing it to a moral choice, rather than a financial. You might hear people say, “Never buy a new car. Always buy used.”

Or you might hear, “Always pay cash,” or “Never, ever lease, unless you’re one of those idiots that has to drive around in a new car every three years.”

If one of those pithy aphorisms applies to you, then stop reading right now, because this column is only for the people that already know they want to drive a new car, and they want to find the least expensive way to finance it. Because leasing is an option, this column will help those in the market for a new car understand how to read their complicated lease agreement.

The vocabulary of leasing is different from that of buying, for good reason. Because when you lease, you are not purchasing a vehicle, it isn’t proper (or legal) to use words like “price” (because there is no sale of the car), or “loan” or “interest rate” (because there is no debt). A lease is an agreement to rent a car for an extended period of time — usually more than two years and less than four.

Nonetheless, it helps to understand the vocabulary of leasing if we know which leasing terms are analogous to the purchase terms, because most of us already know how to think of the vocabulary of…