Residual Value: This is the leasing company's prediction of what the car will be worth at the end of the lease. The residual value is also important because it affects your monthly payment. The higher the residual, the lower your monthly payments.
Sales Tax: A portion of every monthly lease payment is paid for sales tax. However, you pay tax only on the amount of the car's value you are using. In other words, rather than paying 8 percent sales tax on a $20,000 car, you pay 8 percent of the $8,000 the car declines in value as you drive it. People who hate paying taxes love this part of leasing.
Security Deposit: The security deposit is usually equal to one monthly payment. Multiple security deposits can sometimes be made to reduce the interest rate and, consequently, the monthly payment.
Subsidized or Subvented Lease: To make leases more attractive to consumers, manufacturers sometimes subsidize or subvent the leases. This means that they are either offering very low interest rates or they are inflating the residual value of the vehicle. Both tactics have the effect of lowering the monthly payment for the consumer.
Term: This is the length of the lease agreement. Typical leasing lengths are 24, 36, 48 and 60 months. However, sometimes lease agreements are for 36, 38 or 40 months (to make the lease payments appear smaller). We recommend that consumers choose a 36-month lease term.