Does leasing a car include interest?

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When leasing a vehicle, your fixed monthly payments are made up of a number of elements, and interest is one of them. The monthly payments mainly consist of the vehicle cost spread out across the number of months in your contract agreement. Interest is charged with your monthly payments to compensate the lease company for lending you it’s capital investment (the vehicle) during the lease term.

Interest is calculated differently to that which you pay when you take a car loan. The interest rate on a leasing contract is usually not disclosed. However, with leasing, the depreciation value does not change throughout the contract, so you will always pay interest on the same value. So, where monthly payments of the vehicle value will be less than a car loan, the interest is likely to be more than a car loan.

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