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Car-lease incentives: what you need to know Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive tools and financial calculators as well as publishing honest and original content, by enabling you to conduct your own research and compare information for free and help you make sound financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website come from companies who pay us. This compensation could affect how and where products appear on this website, for example, for example, the order in which they appear within the listing categories, except where prohibited by law. Our mortgage or home equity products, as well as other home loan products. This compensation, however, does have no impact on the content we publish or the reviews appear on this website. We do not cover the universe of companies or financial deals that might be accessible to you. Westend61/Getty Images

4 min read Published 27 October 2022

Writer: Anna Baluch Written by Contributing writer Anna Baluch is a former Bankrate contributor. She is a freelance personal finance journalist from Cleveland who loves writing about mortgages, debt and student loans, auto loans and auto financing. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with concise, well-researched and well-organized information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate guarantee

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There are money-related questions. Bankrate can help. Our experts have been helping you manage your finances for over four decades. We strive to continuously give our customers the right guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our information is trustworthy and reliable. Our award-winning editors and journalists produce honest and reliable information to assist you in making the best financial decisions. The content created by our editorial staff is objective, truthful, and not influenced through our sponsors. We’re open about the ways we’re in a position to provide quality content, competitive rates and helpful tools to you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and services, or when you click on certain links posted on our website. This compensation could affect the way, location and in what order products are listed, except where prohibited by law for our mortgage home equity, mortgage and other home lending products. Other elements, such as our own proprietary website rules and whether or not a product is available within your region or within your personal credit score could also affect how and where products appear on this website. We strive to provide an array of offers, Bankrate does not include information about each credit or financial product or service. If you are considering leasing a car, there are a few key factors to know about incentives available. Incentives for auto leases are not like the incentives you receive when you purchase a new car. It’s important to comprehend the specifics of these perks to make sure you have the best price when you lease a car. What are car lease incentives? Car-lease incentives are perks offered by automakers to entice buyers to lease vehicles. Automobile manufacturers frequently advertise incentives for car leases and also promote these on their websites in ads, radio, and direct-mail ads. The purpose of incentives for car leases can be to assist in making leasing a specific type of car more affordable and enticing. 3 types of car-lease incentives Before heading to the dealership, you should be aware of three types of car lease incentives that you should be aware of. 1. Cash-back rebates when leasing a car are similar to those provided when you purchase a vehicle. The rebate, which is for an amount that is fixed that is determined by the manufacturer and applied to the overall cost for leasing the car which means you can cut down on cost. The value of a rebate, however, may vary based on the lease period you select. Any restrictions on the rebate are spelled out on the automaker’s website, usually within the small print of the section on offers. 2. The subsidized interest rate involves the car manufacturer offering a lower interest rate to customers with good credit that use its lending arm, like Ford Credit or Toyota Financial Services. It’s sometimes described as an “lease deal” to a specific . It is important to compare this interest rate with loans you can obtain on your own through another lender to determine which is better. Review all the details of the lease terms for a precise comparison. 3. Subsidized residual values Residual values — and subsidized values — are important factors associated with the cost you pay to lease a car. The residual value of a car, which is set by the leasing company is a rough estimation of what the vehicle will be worth when the lease expires. This figure is key since the price that you are charged for leasing is the sum of the price of the car at beginning in the lease as well as its value when it is end of a lease. If a car’s price was $25,000 when it came out at the time of the beginning of a lease, for example, and its residual value is $10,000, the cost of leasing the vehicle is $15,000the cost of which is divided into monthly lease payments. In order to encourage customers, automakers or leasing companies might offer subsidized leases to make your payments less. Automakers will often offer either an interest rate that is subsidized or a subsidized residual value for a car or truck, but not both. These aren’t easy to understand but you might have to ask. The benefits of car lease incentives If you can make a commitment to a car lease incentive, you may benefit in a variety of ways. Lower monthly payments. You could benefit from lower monthly payments which can make your cash flow more flexible and help you pay to purchase the car you’ve always wanted. Lower payments are possible through an “lease deal” that automakers offer which can help keep your interest rates down or through the cash reward as an down payment. Cash in hand You may receive an automaker’s check or put the cash toward the total amount for the leasing. Extra money in the bank is always beneficial when it comes to car financing, but be aware of any limitations that could be in place. For example, you may be required to use the financing company of your auto manufacturer to benefit from this incentive. A better car for less You may go home in a car with all the bells and whistles for an affordable price. In the event that you’ve been wanting to drive a specific car but you don’t have the funds to buy it, an incentive may allow you to get it to drive for couple of years. The key to leaving with a fantastic car for lower costs is the residual value that is subsidized. It keeps your monthly payments low, while keeping the value of the car higher. What to watch out for While car lease incentives offer many benefits, but there are two major potential drawbacks to signing off with a huge cash reward. Extra mileage fees is crucial to check the specifics when it comes to the amount of cash you receive. In many instances, you may be charged high fees for exceeding mileage limits. Every dealership is different and this could cost you between 15 to 25 cents a mile. Consider the number of miles you drive on a day-to-day basis -and if you’re planning any upcoming trips — when deciding to sign off for a cash reward. Balloon payment The automaker may also need a balloon payment which is a larger one-time payment at the end of the lease. If your budget isn’t able to allow you to make this payment and you’re in a difficult spot. Just keep in mind that if you find incentives for leasing cars that sound too appealing to be true, . Be aware of your state. While car lease incentives have some notable benefits but they also have a major disadvantage: Some states tax car incentives and rebates. If you live in a state that does it, you might have to pay taxes on the full cost of the car before the incentive is applied. There’s no need to fret about this issue if you reside in one of these states that don’t tax incentives: Alaska

Louisiana

Nebraska

Rhode Island

Arizona

Massachusetts

New Hampshire

Texas

Delaware

Minnesota

Oklahoma

Utah

Iowa

Missouri

Oregon

Vermont

Kentucky

Montana

Pennsylvania

Wyoming

The most important thing to remember is that before you jump at any car-lease incentive, read the fine print. Make sure you understand how lease cash rebates or interest rates that are subsidized and residual value affect your out-of-pocket costs. Be aware of the negatives of incentives such as fines for exceeding mileage limits and the hefty, one-time balloon payments. Most importantly, consider all lease terms and whether the lease is appropriate for your financial situation before signing on the dotted line. Learn more

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Written by Contributing writer Anna Baluch is a former Bankrate contributor. She is a personal finance freelance writer from Cleveland who writes about debt, mortgages, student loans and personal loans along with auto loans. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to manage their finances with clear, well-researched information that breaks down complicated subjects into bite-sized pieces.

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