We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
Written by
Michelle Honeyager
Michelle Honeyager is a freelance writer for Bankrate. She has had bylines appear in US News, CNET and other financial publications. She has a passion for helping people make the best financial decisions possible.
Edited by
Pippin Wilbers
Pippin Wilbers is a Bankrate editor specializing in personal and auto loans. Pippin is passionate about demystifying complex topics, such as car financing, and helping borrowers stay up-to-date in a changing and challenging borrower environment.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money .
Bankrate logoFounded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money.
Bankrate logoBankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
Bankrate logoYou have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
If you’re itching for the car of your dreams, lease incentives can make getting on the road more affordable. Lease cash, lower interest rates and higher residual value mean lower monthly car lease payments. However, there are a few drawbacks to consider before signing up so you don’t make any car leasing mistakes.
Car-lease incentives are benefits automakers offer to entice consumers to lease a vehicle. Automakers regularly advertise lease incentives through their websites, commercials and radio and direct-mail ads. Car-lease incentives make leasing a specific type of car more affordable and enticing.
Before heading to the dealership, there are three common types of car-lease incentives to be aware of.
Lease cash is similar to a rebate. Lease cash is a flat dollar amount set by the manufacturer and applied to the overall price tag of leasing the vehicle — thus lowering your costs. The total value of lease cash, however, may vary based on the lease term you select.
Any restrictions on the cash are spelled out on the automaker’s website, usually in the fine print under the offers section.
You may also see these referred to as cash rebates or lease rebates. Some examples include Captive Lease Cash through Honda and Acura or Red Carpet Lease Cash through Ford.
A subsidized interest rate involves the auto manufacturer offering a lower rate for customers with good credit who use the automaker’s lending arm, such as Ford Credit or Toyota Financial Services. It’s often referred to as a “lease deal” for a specific monthly payment.
You will need to compare this interest rate with financing you could obtain through another lender to see which is better. Look through all the details, not just rates.
Residual values — and subsidized residual values — are important factors associated with the cost you pay to lease a car. A vehicle’s residual value, which is set by the leasing company, is an estimate of what the car will be worth once the lease ends.
This figure is key because the amount you pay for the lease is the difference between the price of the car at the outset of the lease and its residual value at the end of the lease. If a car’s price is $25,000 at the start of a lease, for example, and its residual value is $10,000, then your cost to lease that car is $15,000 — an expense that’s divided into monthly lease payments.
As an incentive, automakers or leasing companies may increase the projected residual value in order to lower monthly payments, also known as subsidizing or subventing. Automakers will often offer either a subsidized interest rate or a subsidized residual value on a car, but not both. You can also check to see if it’s worth the deal by comparing the payments against an auto lease calculator.
The EV tax creditCurrently, lessors can claim a federal tax credit of up to $7,500 for qualified EVs. Lessors often pass that savings on to you if you lease the vehicle. While this is not a traditional manufacturer incentive, it may be a motivator to lease an EV to see if one works for your lifestyle and cut gas payments for at least two or three years. Leasing may also be a way to bypass stringent federal guidelines on which vehicles qualify for the credit.
If you can lock in a car-lease incentive, you may benefit in one or more ways.
You may enjoy lower monthly payments, which can free up your cash flow and make it more affordable to drive the car you want. These incentives can keep your interest rates low or apply the cash rebate as a down payment.
You may receive a check from the automaker or apply the money toward the total cost of the lease. But beware of any restrictions that may apply. For example, you may be required to use the auto manufacturer’s financing company to claim the incentive.
You may go home in a car with all the bells and whistles at a price you can afford. If you’ve always wanted to drive a certain vehicle but don’t have the money to buy it, an incentive may help you drive it for a few years.
Although lease incentives are perks, there are two main potential drawbacks to signing off on a hefty cash rebate.
The automaker may require a balloon payment, which is a larger one-time payment at the end of the lease. If your budget won’t allow you to make this payment, you may damage your credit score and face other repercussions.
Just keep in mind: If you come across a car-lease incentive that’s too good to be true, it probably is.
While car-lease incentives come with notable advantages, they do have one major drawback: Some states tax car incentives and rebates. If you live in a state that does, you may have to pay taxes on the full price of the vehicle before the incentive is applied.
You don’t have to worry about this if you live in one of these states that don’t tax incentives:
| Alaska | Massachusetts | Oregon |
| Arizona | Minnesota | Pennsylvania |
| Delaware | Missouri | Rhode Island |
| Iowa | Montana | Texas |
| Kansas | Nebraska | Utah |
| Kentucky | New Hampshire | Vermont |
| Louisiana | Oklahoma | Wyoming |
Before you jump at any car-lease incentive read the fine print. Make sure you understand how lease cash, subsidized interest rates and residual values impact your out-of-pocket costs. Also note the drawbacks of incentives, like steep, one-time balloon payments. Most importantly, consider all the lease terms and whether a lease makes sense for your budget before signing on the dotted line.
Anna Baluch contributed to a former version of this article.
Arrow Right Contributor, Personal Finance
Michelle Honeyager is a freelance writer for Bankrate. She has had bylines appear in US News, CNET and other financial publications. She has a passion for helping people make the best financial decisions possible.
