A car lease (or sometimes known as a vehicle lease) is the business of leasing or the use of a vehicle for a fixed period of time (usually 2, 3 or 4 years) and returned to the leasing company after the primary term for disposal. A car lease is a unqiue form of vehicle funding, and quite distinct from a loan. Commonly it is offered by car dealers as a cost-effective alternative to purchasing a car used by businesses or private individuals without the need for a large cash outlay.

Before the start of the agreement, a fixed monthly rental is agreed upon. There is an early termination fee and a limit on the number of miles a person can drive. If the mileage is exceeded, the customer will have to pay additional fees. Car lease agreements will also specify how much wear on the vehicle is allowed and the fees that need to be settled should that amount of wear be exceeded. When the lease agreement expires, the customer has the option to buy the vehicle at a specified price, or return the vehicle to the company and pay the applicable fees for the damages that may have been incurred.

Advantages of car leasing

• The lease payments will be lower than the payments on a car loan and the qualification is easier.
• It allows you to choose a new model of car once the lease expires, allowing you to drive a new vehicle every few years without having to sell the old car.
• You do not have to worry about the future value of the car.
• For the car lease business, the car will generate income and they will have the option to lease it again or sell it through vehicle remarketing.
• Car lease businesses can generate more money from the rental than from selling a vehicle outright since there is a possibility of repeat customers.

Disadvantages of car leasing

• The main disadvantage of car leasing is the car lease contract which binds you to the agreements stipulated on it. Car lease contracts will cost you more if you wish to break your lease before the term expires. However, some companies may allow you to transfer your lease to someone else.
• You are paying for a car that you don't own. You will spend more money paying the rent than through financing or by paying cash for the vehicle.
• If you are planning to purchase the car after the lease contract expires, you may have to spend more for the car than if you purchased it.

Alternatives to car leasing are car driving and carpooling which does not require you to any contract and is not as costly. The latter two is commonly implemented for commuting from one location to the next. It is common for passengers to join for parts of the trip and provide a contribution to the expenses based on the distance that was traveled. This allows people to share journeys with each other and save money from the extra flexibility.