Leasing a Car in Michigan

Leasing a vehicle in Michigan can mean lower monthly payments and flexibility, but you’ll have to return the car when the lease expires.
Written by Macy Fouse
Reviewed by Jessica Barrett
Leasing a car is a good option for
drivers who are trying to lower their monthly car payments, but don’t forget to negotiate the capitalized cost and money factor.
More US drivers are making the switch to leasing over financing; as of 2020, around 25% of vehicles in the United States are leased. As leasing becomes more popular, you might want to look into it in your state. 
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Reasons to lease a car in Michigan

Michigan drivers have a shorter-than-average commute, but nearly 92% of workers rely on personal vehicles to get them to and from work every day.
Buying and financing are the traditional choices for those who wish to own their car, but leasing is quickly becoming a top alternative—and for good reason. Leasing comes with all the benefits of having a reliable car to drive but with lower monthly costs
Just like other types of leases, a car lease is just a long-term rental agreement, and it’s a good option for drivers who don’t want the hassle or expenses that come with car ownership.
Every option comes with pros and cons, though. Here are a few advantages to leasing a car. 


Unless you have the cash to pay for a car upfront, you’ll have to finance it. Financing a vehicle usually comes with a sizable down payment along with monthly payments, locking you in debt for years. 
When you lease, though, you get the power to choose the lease terms and length of the rental agreement. You’ll pay the monthly bill for the duration of your lease agreement, then hand over the keys when the lease is up. This way, you won’t have debt or a used car to deal with later.

Lower monthly cost

According to
, Michigan’s cost of living is lower than most states. Due to unique car insurance laws, though, the transportation costs are higher than the national average.
For the most part, monthly car lease payments are cheaper than
car loan
payments for new cars. Depending on your lease agreement, car leases can also include maintenance costs or other benefits. Lower rates are great ways to alleviate the strain on your bank account. 

No loss on depreciation 

You’ve heard it before: your new car begins losing value the moment you drive it from the lot. Not only that, but if you’ll be making monthly payments for a while, your car may not have much value when you finally own it. 
When you lease, though, worrying about depreciation isn’t your problem. You’ll be paying to use the vehicle at its peak, so you won’t be held responsible for what happens after your term ends.
Key Takeaway: When you lease, you can pay less each month to drive a vehicle that works best for you.

What to look for when leasing a car in Michigan

If you’re new to the leasing world, you’ll need to understand a few key parts of the process before jumping into it. 
Just like auto financing, leasing a vehicle will require an upfront payment along with monthly payments throughout your lease term. Rather than paying on the loan principal, though, you’ll be paying for the vehicle’s lost value over the term of your lease.
With a closed-end lease, at the end of your lease term, you’ll return the keys and be free from all responsibilities. Most dealers will also offer the option to sign a lease that allows you to purchase the car when the lease ends. 
Be sure to know the lease’s exact terms before heading to the dealership, because most lease terms are negotiable. Below are a few key terms to know—and a few red flags to watch for.

Terms to know

  • Capitalized cost: The “cap cost” is the amount of money your monthly payments will be based on, often the manufacturer’s suggested retail price. This number will go up with lease add-ons, like service contracts, registration fees, warranties, and insurance. The cap cost can be negotiated if you want lower monthly payments. 
  • Money factor: This refers to the interest rate you’ll have to pay. The money factor usually falls somewhere between 0.0021 and 0.0046. To calculate your interest rate, multiply the money factor by 2,400; you’ll want this number to be as low as possible so your monthly payments stay doable.
  • Mileage cap: The majority of dealers put a yearly mileage limit in the lease agreement. If you exceed your limit, you’ll be stuck with some hefty fees.

Red flags to watch for

Take your time when looking for a lease agreement that works best for you. Make sure you get everything in writing before signing an agreement and be cautious of any dealer that:
  • Wants you to sign a lease on your first visit
  • Tries to focus on monthly payments without negotiating the cap cost or money factor 
  • Slaps on excessive fees and expenses to your cap cost 

How much should I expect to pay?

reports that the average monthly lease payment in the final quarter of 2020 was $460, so try to get a monthly payment around that amount. Your total car expenses should be around 20% or less of your monthly income. 
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The average car lease term is 36 months, or three years. Be sure to take your specific needs into account—like how often you drive and whether you expect any financial changes—when choosing your lease term.
Leasing is a good way to lower your monthly expenses, but it’s not for everyone. If owning your car is important to you, leasing is likely not the greatest idea.
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