	Leasing	Financing
More flexible	Similar to a long-term rental Multiple options for lease terms and agreement duration Access to a reliable car Debt-free after the end of the lease term	Long-term commitment—you have to pay off the car loan and own the same car for years Payment terms are often rigid Locked in with a large amount of debt until the loan is paid off
Lower monthly cost	Lease payments are normally much lower than loan payments Car expenses can be further lowered if you negotiate for routine maintenance and other benefits	Car loan payments, insurance, and fuel can greatly increase the average cost of living in Texas by around $5,992 Some car loans come with high interest rates that add up over the life of the loan
No loss on depreciation	Car returned to the dealer after your lease term	A financed car is an investment that actually loses value off the purchase price before you get full ownership of the car By the time you pay off the entire loan, your car may already be worth little to nothing

MORE:

Is it better to lease or buy a car?

What to look for when leasing a car in Texas

The

leasing

process is relatively simple, but you should still familiarize yourself with what to look out for before getting a lease.

Payment amounts: Most financing options include a down payment upfront, followed by monthly car payments over the lease term. However, rather than paying towards car ownership, you are paying for the car’s loss of value as you use it.

Type of lease: If you sign a closed-end lease, your car is

returned

to the dealership at the end of your lease term and you are free of other responsibilities. However, you can also opt to sign a lease with the possibility of purchasing the car at the end of the term.

Terms of the lease: Since the terms of a lease agreement are not set in stone, you have the opportunity to negotiate a better deal. Who is responsible for oil changes or other maintenance activities? Pay attention to the terms below.

Car lease terms to know

Capitalized cost: Your

monthly payments

are calculated based on the capitalized cost. This cost is the total amount the dealer receives for the car, including the manufacturer's suggested retail price plus add-ons, such as the service contracts, registration fees, warranties, and insurance. Negotiating for a lower “cap cost” will reduce your monthly payments.

Money factor: This determines the financing charge on your lease and can range from 0.0021 to 0.0046. You can translate it to the annual percentage rate by multiplying this number by 2,400. You’ll want a lower money factor for lower monthly payments.

Mileage cap: There is a maximum mileage that can be driven each year on your leased car. If you foresee driving a lot, it is better to get a higher mileage cap than to go over the limit, as there will be penalty fees per mile when exceeding the limit.

Remember to ask if you’ll have the option to purchase the car at the end of your lease. It will technically be a used car at the end of your term, and by that point, you’ll be in a good position to negotiate a deal.

Dealer red flags to watch for when leasing a car

The leasing process takes time, but it’s worth putting in the extra effort into finding a lease agreement that will save you money in the long term. Read over the contract to ensure all the leasing options you negotiated are included before signing.

Here are some dealer behaviors you should be wary of:

You get pressured to sign an auto lease on your first visit

Monthly payments are being discussed without negotiating cap cost or money factor

They have added many extra fees and expenses to the cap cost

"I’m earning

awesome rewards

every week, just for driving safe!”

The average monthly lease payment is $505

The national average monthly lease payment is $505, according to

Statista

. This is a good baseline for calculating a fair monthly payment.

Your lease amount will vary depending on the lease term, the model, your zip code, your interest rate, and other factors

Aim for your total car expenses to be at or below 20% of your monthly income

Look for car lease deals and incentives that pop up in your area, and don’t be afraid to wait until the specials season when dealerships are especially eager to sign up new lessees

Shop around with different leasing companies to unlock the best possible deal, and test drive a variety of cars to find the right fit