Leasing 101: Why Similarly Priced Vehicles Can Be More or Less Expensive to Lease

May 21st, 2017 by

One of the most strange things that most people find when they first learn about the option of leasing a car is the payment difference between similarly priced cars. Now, that might sound absolutely insane if you’re completely new to the leasing process. After all, how can a car payment be so radically different if they’re sale prices are nearly the same?

It Starts with Depreciation

When you lease a vehicle, you’re essentially paying for the expected depreciation during the term of your lease. This is why leasing a car is so often compared to renting. Because once the lease contract is up, you simply turn the vehicle in and have the option to lease (or buy) any car you’d like.

But What the Depreciation of a Specific Vehicle?

The main determining factor of the expected depreciation on any car is the demand for used models. New cars that are produced and sold at high volumes typically have average or below average depreciation because there are so many in the market. So prices are lower due to the amount of different dealers trying to sell the same type of car.

What Other Factors Go Into a Lease Payment?

Optional extras can be a big part of depreciation, especially among similarly priced vehicles. To give you an idea of how this could work, we put together an example below:

  • Vehicle 1 ($40,000) – Three-row SUV with moonroof, navigation, heated and cooled seats.
    Vehicle 2 ($40,000) – Three-row SUV with no moonroof, no navigation, and only heated seats.

Can you guess which one will have the lower lease price? Surprisingly, it’s usually Vehicle 1. And that’s because the optional extras help add value to the vehicle as a used car, helping it to depreciate less than the similar vehicle at the same price without the options.

Posted in Leasing 101