I don’t understand why there is an interest rate quoted on car leases. How is leasing something different than renting something? If I get an apartment I just pay rent. So how does interest come into play.
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Leasing IS just long term renting.
There isn’t an interest rate specifically, but the cost of borrowing money (the leasing company has to buy the vehicle, and pay interest on money to buy their fleet of leased vehicles) does factor into the total lease cost. The lease payment is made up of the depreciation over lease term and money factor, which is the calculated fee for them letting you lease and includes their interest costs, administration expenses and profit for the leasing company.
Apartments also do have interest factored into the rate, as the landlord may have a mortgage on the property. They don’t break it out and just advertise a final rental price but vehicles have firm cash costs, financing rates, or lease rates. So you’d see the MSRP or negotiated cash price and then see the additional costs based on the financial choice for acquiring the vehicle.
The other biggie is the ability to buy out the car at the end. This is sometimes a tax game where your company leases it then you personally take the buyout at the end as a shell game to save on taxes.
However some companies like tesla don’t offer a buyout. And this can bite you in the ass if the car gets some ‘uninsurable damage’. You are responsible for giving back that car in excellent condition and if you fuck it up when your girlfriends dog got nail marks over the entire interior and all of a sudden you are on the hook to repair that damage. Normally you could just buy the car out at the end.
Generally speaking, leases are for suckers or to move you into a car you can’t afford. Buy the car outright and run it into the ground, or you will forever be cursed with car payments.
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