A car lease is a long-term rental: instead of buying the vehicle, you pay for the depreciation it loses during your lease term (plus rent charges and fees), usually for 24-48 months. Monthly payments are typically lower than financing the same car, but you don't build equity, you're capped on mileage, and at lease end you return the car, buy it for its residual value, or lease a new one.
Leasing and financing answer the question 'how do I drive this car' very differently. When you finance, you borrow to BUY the car and own it at the end. When you lease, you pay to USE the car for a set term and hand it back (unless you buy it out). WHAT YOUR PAYMENT COVERS: a lease payment is built from the car's expected depreciation over the term (the difference between its price and its 'residual value' at lease end), plus a finance charge (the 'money factor,' the leasing equivalent of an interest rate), plus taxes and fees. Because you're only paying for the portion of the car you 'use up,' monthly payments are usually lower than a loan payment on the same vehicle. MILEAGE LIMITS: leases cap annual mileage — commonly 10,000-15,000 miles a year. Going over means per-mile excess charges at lease end, and you can also be billed for wear and tear beyond 'normal.' AT LEASE END you generally have three options: return the car and walk away (after any excess-mileage/wear charges), buy it for the predetermined residual value (a 'lease buyout,' which you can finance), or lease something new. LEASE VS. BUY: leasing suits drivers who want a newer car every few years, lower payments, and predictable maintenance under warranty, and who stay within mileage limits. Buying suits drivers who keep cars long-term, drive a lot of miles, or want to build equity and eventually have no car payment. The Federal Trade Commission's guide to vehicle leasing (https://consumer.ftc.gov/articles/buying-leasing-car) and the CFPB's auto resources (https://www.consumerfinance.gov/consumer-tools/auto-loans/) explain the disclosures to compare. ClearValue Lending is a financial-decisions platform, not a dealer or lender.
You pay to use a car for a set term (usually 2-4 years) rather than buying it. Your payment covers the car's depreciation over that term plus a finance charge and fees. You stay within a mileage cap, and at the end you return it, buy it for its residual value, or lease a new one.
Leasing gives lower payments and a newer car every few years but no ownership and mileage limits. Buying costs more monthly but builds equity and ends in a car you own with no payment. Lease if you like switching cars and drive moderate miles; buy if you keep cars long-term or drive a lot.
You generally choose one of three options: return the vehicle (and pay any excess-mileage or wear charges), buy it for its predetermined residual value (you can finance this lease buyout), or lease a new vehicle.