Everyone has heard of a car lease before, but how many consumers FULLY know what it all means given its many terms and conditions? Leasing can be a fantastic financial option for many shoppers while others would be much better off through simply purchasing a car outright. That's why it is important to understand exactly what you're getting when evaluating various lease deals and how they work.

Many of our Orange County customers come to us either confused or misinformed on the topic, but that's okay! Car leasing can be a tricky concept if it has never been fully explained to you before and that's why Volvo Mission Viejo is here to help explain the process and address some frequently asked questions to show you that it's actually quite simple.

What is a car lease?
Essentially, a car lease is a form of automotive financing in which someone pays a dealership for the cost of depreciation on a vehicle throughout the duration of the lease. This depreciation cost is calculated by subtracting the vehicles sales price by the estimated value at the end of the lease.

Many people like to think of a lease as a long-term rental, which isn't a terrible comparison, but it's not completely accurate.
  • For one, the amount of money put down at the start of the lease will affect the monthly payments and overall cost of a lease. So two people can be leasing the same car but the person who puts down more money up front will end up paying less over the course of their agreement.
  • Secondly, the cost per month of a lease changes depending on how long the lease agreement is because cars depreciate faster in the beginning of their use. So someone leasing a car for only one year will have higher monthly payments than someone leasing for two years.

Is leasing better than buying?
There is not a simple answer to this question as there are varying pros and cons to both options that hold different levels of importance based on each consumer's individual needs. Lets break down the basic list of benefits and drawbacks of each:

  • Lower monthly payments allows you to save money or upgrade to a nicer car than you could afford when purchasing.
  • You get to drive a new car every few years and don't need to worry about being stuck with one you don't like.
  • Leasing allows you to always be driving a late model car during its most trouble-free years, limiting the risk of mechanical issues arising to deal with.
  • A new car under the manufacturer's warranty for the duration of your lease further limits risk financially if something were to go wrong.
  • You don't need to go through the hassle of trying to sell or trade in your car at the end of the lease.

  • You own the car completely, so you can customize it however you'd like and sell it whenever you'd like.
  • Your car will have resale value and can be used as a trade in once you decide to get a new vehicle.
  • There is less responsibility it purchasing a car because you will not be forced to fix every instance of damage or pay wear-and-tear fees.
  • You are free to drive the car as much as you'd like without contractual limits.

  • Once your lease is over, the car is no longer yours unless you purchase it. This means it has no resale value at all to put towards a new vehicle.
  • There are limits to how many miles per year you can drive on a leased vehicle with fees if that limit is exceeded. Extra miles may be purchased for much cheaper than these fees.
  • You are responsible for damage done to the car as it must be returned to the dealership in good condition.
  • If you wish to get out of a lease agreement early, there will be additional fees as this would constitute a breach of contract.

  • Monthly costs will be much higher than a lease.
  • A hefty down payment will also be needed¬† to avoid very high interest rates on a higher priced total cost.
  • Your vehicle will likely outlive its manufacturer's warranty, exposing you to more risk of mechanical issues liability during your ownership.
  • Cars depreciate quite quickly, with much more money invested in a purchase than a loan resulting in further loss.

Do I need to make a down payment for a lease?
Many dealerships use deceptive advertising techniques offering extremely low monthly lease payments only to find out that they would require an insanely high down payment in order to secure those rates. Us here at Volvo Mission Viejo think that's unfair and are proud to offer great lease deals at low rates without any catches.

That means that even without a large down payment, you can still get low monthly lease payments for the Volvo of your dreams!

How does leasing a car affect my credit score?
Yes, leasing a car will affect your credit score. So long as you stay up to date with your payments, you should see a significant increase to your credit score over time. However, much like defaulting on a loan, failure to pay your lease payments will reflect negatively in your credit score.

What happens at the end of the lease? Can I keep my car?
At the conclusion of your lease agreement, there are a few choices that can be made moving forward. If you love the car that you've been driving, you can either extend your lease or simply purchase the car. This can often times lead to great deals offered by the dealership to keep their customers happy opposed to risking them signing a new lease from their competition. One of the main advantages of leasing however, is driving the newest models, so many of our customers look to find the next best thing from our great lease specials.

Can I end my lease early?
You can terminate a lease agreement early, however there are often hefty fees that come along with doing so. Because of this, most lessees try to avoid it at all cost using other alternatives. Some of these alternatives include:
  • Transferring your lease to someone else who wants to take over the payments.
  • Buy out the car and then sell it.
  • Trade in your lease for a new vehicle. You will still be liable for the fees but they can be included into the new monthly payments. This is a good option for those who just want a new car.

Who should consider leasing?
As mentioned earlier, there are plenty of different pros and cons that come along with buying and leasing but who should consider a car lease rather than purchasing? We think that a car lease is ideal for someone who likes driving newer and nicer cars for short periods of time and is looking to do so for low monthly payments. Why bother putting a lot of money down on a car purchase that will cost more when you know that you'll have to go through the process of selling it in just a few years?

Who should avoid leasing?
Opposed to the consumer who knows they'll be looking to get rid of their new car in just a few years, consumers who want to own a car long term should probably avoid a lease and look to purchase. This is especially true for consumers who have more money to put into a down payment up front, because this will greatly reduce monthly costs and save on interest over the years. Often times, a larger down payment will make much more of a difference on the overall total cost of a car purchase than it would for a car lease.

Leasing terms defined
In order to properly evaluate a proposed car lease and make sure you are getting the best deal possible, it is necessary to understand all of the common terms that come with the lease. We want you to be as informed as possible to feel comfortable and confident going into a meeting with one of our salesmen!

Capitalized Cost: the negotiated price from which the monthly lease payments will be calculated from. Can be thought of as essentially the selling price of a car.

Depreciation: the amount of value by which the car drops by throughout the duration of the lease. This is the main component of the monthly payments that a lessee pays a lessor. This is calculated by subtracting the estimated residual value from the original listing price.

Gap Insurance: in case of a car theft or an accident that leaves your vehicle totaled, gap insurance will cover the "gap" between what your insurance company will pay you and the amount you still owe on your lease. This can be a massive amount of money.

Money Factor: this is a very important aspect of a lease that can be thought of as an interest rate that is expressed in a decimal. To convert a money factor to an interest rate standard percentage, you multiply it by 2400.
  • For example, a money factor of 0.0025 x 2400 = 6% interest rate.
Residual Value: the estimated value of the car at the end of the lease term. This figure is predicted at the beginning of the lease to determine how much depreciation will occur. 

Now that you are fully informed, you can begin your car shopping journey with the confidence that you'll know what it takes to get a good deal! Volvo Mission Viejo is proud to be able to offer our Orange County customers the best lease deals on brand new Volvo cars and we recommend checking them out.

If you think that purchasing is the better option for you, then you can check out our large inventory of new vehicles or our low-priced inventory of used vehicles.

If you have any questions or want any information on our inventory or services, please feel free to contact us.


Volvo Cars Mission Viejo

28730 Marguerite Parkway
Directions Mission Viejo, CA 92692

  • Sales: (949) 359-5000
  • Service: (949) 359-5000
  • Parts: (949) 359-5011


  • Monday 9:00AM - 7:00PM
  • Tuesday 9:00AM - 7:00PM
  • Wednesday 9:00AM - 7:00PM
  • Thursday 9:00AM - 7:00PM
  • Friday 9:00AM - 7:00PM
  • Saturday 9:00AM - 7:00PM
  • Sunday 10:00AM - 6:00PM