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How do the lease payments work?

Home » Automobiles » Leasing a Car » How do the lease payments work?

When you lease a car, you still go through a dealership as you would if you were buying a car. However the dealer doesn't actually give you a lease, a leasing company provides that option. You won't actually deal with the leasing company until you start making your payments. The dealer works out the terms of the leasing agreement with you on behalf of the leasing company. For this service, the leasing company usually pays the dealer a commission, which adds to his profit on the deal. Once the contract is signed, your relationship is with the leasing company, not the dealer, unless it's an issue with the vehicle itself.

Leasing companies used by dealers are usually subsidiaries of the car manufacturer (called "captive" leasing companies), such as Ford Motor Credit or General Motors Acceptance Corporation (GMAC). However, dealers can also offer leases from banks and other lending institutions with whom they've worked out mutually beneficial business terms. So, automobile dealers are in the business of providing automobiles; leasing companies, banks, and credit unions provide leases.

As a leasing consumer, you have the option to shop for your own leasing company, bank or credit union to find better lease terms than the dealer's leasing companies can offer you. These independents can often arrange to get you an even better price due to fleet purchasing arrangements. The tradeoff is that dealers make it very convenient to arrange for both the vehicle and the lease all in a single meeting, and the dealer's captive leasing company can often offer special lease terms to help the dealer move vehicles.

Next Page: What happens at the end of the lease?

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