Leasing a car is similar to renting a place to live. You sign a contract to use the property for some time at a set price and agree to meet certain conditions along the way.

Just like renting a house or an apartment, when your auto lease term ends, you no longer retain the privilege of driving the vehicle and must return it to the leaser. 

Aside from that, just like renting property, you have to keep a leased car in good condition and drive it under normal conditions while it's in your possession. If you turn in a leased car with damage, you may be responsible for additional costs.

Several factors determine your monthly lease payments on a car lease contract. Among them are the cap cost, money factor, mileage limit, and residual value.

When leasing a vehicle, the capitalized or cap cost is one of the most significant aspects affecting your monthly payment. The cap cost is the amount of money you and the seller agree on as the vehicle purchase price. The cap cost influences all of the other components of your lease, so negotiating a favorable one helps you in the long run.

The money factor on a lease is similar to the interest rate on a car loan. Also known as the lease factor or the lease fee, the money factor is the financing charge for the lease. 

The mileage limit is how many miles per year you can drive without incurring additional fees. Typical mileage limits are 10,000, 12,000, and 15,000 miles per year.

When your lease agreement ends, the residual value is the predicted worth of the vehicle when you take depreciation into account. You'll have the option of buying the car for this price when you turn it in. This is also known as the buyout price. 

Financing a vehicle can be a hassle. Not only applying but also finding someone you can trust takes time and energy. Let Shift handle the details for you. Shift works with a network of trusted lenders who compete for your business, so you get the best deal on financing. Obtaining a loan through Shift is so convenient that nine out of 10 buyers choose us when financing. Got a low credit score? Don't worry. At Shift, we welcome cosigners.

Once you've determined the make and model that's right for you, check the manufacturer's website for special lease offers or incentives. 

Some lease promotions might seem like a great deal because of low monthly payments, but you also have to consider upfront charges like the down payment or the acquisition fee. And a low yearly mileage limit may negate what seems like a bargain.

Just like when buying a car, negotiating the MSRP on the sticker to a lower figure will save you money on a lease, both on your monthly payments and in total cost.

In lease negotiation, the agreed-upon selling price of the vehicle is the cap cost. Negotiating the best price on the cost of the car goes a long way in determining how much you pay per month and in whole. 

Sometimes, lease customers only pay attention to their monthly payments while not considering the importance of the cap cost and how it affects them financially. 

Sellers can take advantage of lessee simply by extending the lease term, resulting in lower monthly payments but a higher total cost in the long run. 

Agreeing on a lower cap cost lessens the difference between the sale price and the car's residual value, which is the amount that determines your lease payments. Hence, the lower the cap cost, the lower your monthly payments for a given period. 

Stressful negotiation can take the fun out of buying a car. All of the time spent going back and forth on price with a salesperson is a hassle that often winds up being a pointless waste of time. At Shift, we take the stress out of car buying by cutting out the need to negotiate and offering our customers a reasonable price on each of our vehicles from the start.

Like the annual percentage rate – or APR – on a car loan, the money factor on a lease is an interest charge added into your monthly payments. 

Similar to the APR on a car loan, lower money factors mean you pay less per month and during the life of the lease.

A percentage indicates an APR, like 5 percent. A decimal like .0200 signifies the money factor on a lease. Multiplying a lease money factor by 2,400 gives you the equivalent APR. 

Lease money factors vary greatly, so performing research ahead of time puts you in the driver's seat before you sign on the dotted line. If the money factor offered on your lease doesn't line up with market rates, negotiating it down to something acceptable saves you money.

A lease's yearly mileage limit specifies the number of miles per year that you're able to drive the vehicle. Standard yearly mileage limits on a lease are 10,000, 12,000, and 15,000. Should you exceed the set mileage limit, you'll face additional fees.

Negotiating a car lease with a mileage limit close to the number of miles you drive per year helps you obtain the best lease for you. 

Leases with lower yearly mileage limits result in high residual values, lowering your monthly payments. However, if you go over the mileage limit, you could be responsible for expensive fees when your lease ends. 

Conversely, leases with higher mileage limits decrease the vehicle's residual value and raise your monthly payments, but you have more freedom to drive when and where you please. And you have less risk of going over your mileage limit and paying extra charges. 

Leasing a car may seem attractive on the surface, but buying a used car has the potential to save you thousands of dollars in the long run. And unlike a leased vehicle, when you buy, it's yours, period. Where can you go for quality vehicles that stand the test of time? At Shift, certified mechanics perform extensive 150-point inspections, and you get a free Carfax report for the ultimate in transparency. If you live in one of Shift's many service areas, a concierge will drive to you, letting you take a commitment-free test drive before you decide whether or not to sign the papers.