Vehicle leasing has seen big changes in popularity over the decades. In the 1990s, leasing exploded as an affordable option, allowing people to drive high-end luxury cars for a fraction of what the monthly payment would be through financing.
However, the industry hit a rough patch in the early 2000s, when resale values plummeted, leaving banks holding the proverbial bag. Then came the 2020s, when supply chain chaos and empty lots upended the market, causing leasing deals to all but disappear.
Nowadays, things have normalized a bit, but whether leasing is a good idea depends on a few factors, some of which might be out of your control. If you’re about to kick the tires and wonder whether to sign a lease or just buy it, here’s how the market is moving right now.
What exactly is a car lease?
Hybrid and remote workers can take advantage of leasing today
When you buy a car, you have two main paths: you can pay cash to own it from day one, or you can finance it and make monthly payments over time.
Financing is the best option if you have a long commute or prefer to drive your vehicles “until the wheels fall off.” In certain cases, financing may be better if you want to modify the vehicle with aftermarket accessories or engine modifications, as lease agreements require you to return the car exactly as you received it.
The standard lease program today runs between 10,000 and 12,000 miles per year over the course of two or three years. While 15,000 mile per year contracts can still be found, they will have higher monthly payments as lenders take into account the steeper depreciation curve. In contrast, low-mileage leases, capped at or around 7,500 miles per year, have gained popularity among hybrid and remote workers.
All things being equal, the lower the mileage allowance in the lease, the lower your monthly payment will be. This is because when you lease, you’re basically paying for the depreciation, or value that the car loses while you drive it. Thus, the lower the annual miles of the lease, the lower the depreciation.
Then, at the end of those two or three years, you hand back the keys and walk away, or you buy the car for a pre-set price called residual value.
- What’s included
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M12 Impact Driver, Hammer Drill, 3/8 Inch Ratchet, Charger, Two Batteries
- Warranty
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5-year warranty on tools, up to 3-year warranty on batteries.
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Is leasing a good idea right now?
The short answer is it depends
In terms of today’s market, because residual values remain stable and somewhat more predictable for trucks and SUVs than in the past, the automaker’s financing arm can generally offer lower payments for those vehicles. Since demand for sedans, in general, is not as high as that for trucks and SUVs, some manufacturers and dealers may be offering special deals to keep inventory moving.
In other words, it’s a good time to lease a vehicle and it may be the right decision if:
- Want the latest technology: By leasing a new vehicle every few years, you’ll have something with the most up-to-date safety systems, infotainment features, and powertrain advancements.
- You want the lowest possible payment: Generally, the lease payment will still be less than the monthly loan payment for the same vehicle in the current interest rate environment.
- I don’t want to deal with maintenance costs: With a leased vehicle, you will be covered by the factory warranty for the duration of the lease, so any unforeseen mechanical failures are taken care of by the dealership at no cost.
However, even in an ideal leasing market, it only makes sense if you can stay within mileage parameters. Excess mileage penalties at the end of a lease can offset the lower initial monthly payment associated with financing. That being said, here are some caveats to keep in mind:
- Consider your daily schedule: If you end up driving more than expected, leasing may be less forgiving than financing due to mileage restrictions. If you think your driving habits will remain relatively the same for the next two or three years, leasing may be a good option. However, this can be difficult to predict as unexpected life changes can occur.
- Try to use what you have: Similar to penalties for excess miles on a lease, unused miles on your lease are not credited to you at the end of the term. If you turn in a leased vehicle with, say, 2,000 miles under its allowance, you will not be reimbursed for those miles, even if you actually paid for them over the course of the term.
The best vehicles to lease in 2026
Electric vehicles can be a good option
Not all cars are created equal on a lease. yes you are considering a lease agreementThese vehicles can offer the best terms and conditions.
- Conventional SUVs: Vehicles like the Honda CR-V, Toyota RAV4and hyundai tucson They are always a good option. Demand for these SUVs (and similar models) is typically strong in the used vehicle market, so lenders may set higher residual values, which translates into lower monthly payments. The GMC Terrain and Mazda CX-50 also tend to lease well.
- Everyday Sedans: Rent a Honda Civic, Toyota Corolla, Hyundai Elantraeither Volkswagen Jetta It can be one of the most economical ways to drive a new car. Generally speaking, a sedan will have better fuel economy than an SUV, which can result in savings over the life of the lease.
- Electric vehicles: With EV sales cooling, buyers may worry about the value of a new EV a few years from now. Leasing allows you to drive an electric vehicle without worrying about future resale value.
3 questions to ask at the dealership
These will give you more clarity in the fine print.
Don’t just look at the monthly payment. Ask these three questions to make sure the fine print doesn’t catch you out later:
- What is the money factor?
This is the interest rate in disguise and dealers are not legally required to display it as a percentage. It is written as a small decimal, such as 0.0025. To see the actual interest rate (APR), multiply that decimal by 2,400. In this case, 0.0025 becomes 6%. If that number is higher than current financing rates, the dealer may have increased it to make additional profits.
- What is the total due at signing?
Television and YouTube ads may show a low payout on screen, but require an upfront payment of $4,000, $5,000, or even more. Putting down too much is risky because leases are structured differently than a financing agreement. If the car is totally damaged during the lease, the insurance pays the lender (i.e. the lessor) and you will not get your down payment back.
- What is the disposition fee?
Think of this as a “restocking” fee when you return the car. It usually costs between $300 and $500 and is good to know so it isn’t a surprise at the end of the lease. Often called a disposition fee for short, some dealers and automakers will waive it if you plan to lease again, as customer loyalty far outweighs a one-time charge.
The final result
Leasing in 2026 isn’t the waste of money some old-school financial gurus claim it is, as long as you can stay within your annual mileage allowance. If you love the smell of a new car and want to stay under warranty, leasing can be an affordable and fun way to drive your next vehicle.
