What are the Terms of Leasing a Car?

Exact leasing terms and options may vary between leasing banks. The most common leasing terms include monthly term options, mileage allowance, insurance requirements and any fees associated with the lease. You can find this information in your lease contract. Read your contract over before signing it to avoid any issues during or after your lease.

Lease Term

You must choose a monthly term to lease a vehicle. At the end of the term, you can return the car to the leasing bank or choose to purchase it. Lease terms differ by bank, but most offer terms from 24 to 60 months. Choosing a term up to 39 months is ideal, as you'll be driving the vehicle under its manufacturer warranty. Terms longer than 39 months usually result in a monthly payment similar to financing. Talk to your dealership to find out the payment differences of each term option if you would like to change it.


Your lease payment is based on the vehicle's expected depreciation, which is affected by the mileage you choose. Despite mileage offers listed in advertisements, many banks offer mileage choices of 10 to 18,000 miles per year. Based on the total amount of mileage the car will have at the end of the term, the bank guesses its future market value, which stays out of your lease payments. If you go over your mileage allowance, you'll pay penalty fees that may range from 10 to 20 cents per mile. Mileage choices beyond 15,000 miles per year usually result in a monthly payment similar to financing, as well.


During the term of your lease contract, you must maintain a continuous collision policy with limits and deductible options required by the leasing bank. If you do not maintain this coverage, your bank may pursue repossession or add a high-cost insurance policy to your lease amount that increases your monthly payment amount. Most banks also require lessees to purchase a gap insurance policy, which you can buy for a one-time fee of $100 to $600. If your insurance company declares your vehicle a total loss, the gap insurance policy pays for the car's entire value so you don't have to.


Various fees are associated with leasing. To determine which fees your bank charges, read your contract thoroughly. You must maintain and repair your vehicle so that it remains in good condition throughout the term of the lease. Your contract may state a wear-and-tear limitation, such as up to $1,000, which may cover the wear your car sustains over the leasing term, such as lightly worn seats or light scratches in the vehicle's paint. You may also find that you have to pay a fee upon returning your lease at the end of the contract.


About the Author

Shanan Miller covers automotive and insurance topics for various websites, blogs and dealerships. She has extensive automotive experience, including auction, insurance, finance, service and management positions. Miller has worked for dealer sales events around the United States and now stays local as a sales and leasing consultant for a dealership.