Car leasing is based on a lease contract and under which a lessee pays for the amount by which the value of the leased automobile depreciates during the time the lessee is using the car. Thus, the difference between the original value of a car and its value at the lease-end (residual value) — or, depreciation, –  is the primary basis for the cost of car leasing.

The less value a leased car looses during the lease period, the less it costs to the lessee. For instance, we start leasing two cars at the same $50,000 new price value each. After two years lease, one of the cars is worth $35,000 and the other is valued at $30,000. In this example, the first leased car costs us less to lease because of a smaller depreciated value.

Tags: car