Definition
A contract granting use of property for a set period at a set payment: an apartment for a year, or a car for two to four years. You are paying for use, not building ownership. Car leases add mileage caps, wear charges, and a residual value you can pay to keep the car at the end.
Why it matters
A lease is a fixed obligation for its full length: breaking an apartment lease or exiting a car lease early carries real penalties. On cars, the low payment is the visible half; the invisible half is handing the asset back with nothing owned.
Example
A driver leases a $38,000 SUV at $389 a month for 36 months with a 12,000-mile annual cap. Driving 15,000 miles a year adds about $2,250 of overage fees at $0.25 a mile, and after three years and roughly $14,000 of payments they own nothing unless they buy the car at its residual price.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.