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Leasing Terminology

12 key terms you’ll want to understand before you head to your local dealership.

Thinking about leasing a new Toyota vehicle? Maybe you’re already daydreaming about which model, style, and color. Maybe you’ve spent hours comparing features and options and imagining your ideal Toyota. That’s the fun part. And it’s hard to go wrong with so many great options, flexible leases and excellent customer service your friends at Toyota Financial Services (TFS) offer.

Before you commit to anything, let us help you get clear on some leasing terminology that may not be familiar. We’ve also created a handy TFS Lease Lingo Guide to explain a dozen key terms that will help you keep it all straight.


Let’s start at the beginning: what is leasing and how is it different from buying? A lease is an arrangement that allows a person, also called a lessee, to use a vehicle for a fixed period of time. Common time frames are 24, 36 or 48 months. Buying means you are going to own the vehicle outright after paying for it. Some people pay in cash upfront, but most borrow funds to finance the purchase. If you’re trying to decide whether leasing or buying is best for you, we’ve got a fun Buy or Lease Quiz that will help you out!

When you lease a car, you are paying a monthly fee to use the car for a specific number of miles during a specific amount of time. According to Consumer Reports, monthly lease payments may be lower than monthly purchase payments because you will mainly be paying for the vehicle’s depreciation, not for ownership of the vehicle itself. Since you won’t own the car, it’s possible to drive a new car every few years without ever having to worry about selling or trading in your old car, however you won’t gain any ownership with your monthly payments. 

Depreciation simply means the amount by which a vehicle decreases in value over time due to normal use. When your lease is finished, your Toyota dealership will sell the car but will need to bridge the gap between when you lease it (new) and when you return it (24, 36 or 48 months old). That’s why a lessee is charged depreciation, to cover that gap. 

Once you’ve decided on your vehicle, whether it’s a sporty Toyota Camry, a stylish Toyota Corolla or an eco-friendly, award-winning Toyota Prius, the next order of business is customizing your lease to best meet your needs. You’ll need to assess how much driving you do and decide what you should set as your Allowed Mileage, or the number of miles you can drive your leased vehicle without paying an extra charge, typically 10,000 to 15,000 miles per year. For leases up to 36 months, your vehicle comes with a Basic Warranty. That means for the first 36,000 miles or the first 36 months, whichever comes first, repairs and adjustments needed to correct defects in materials or workmanship or any part supplied by Toyota are covered, subject to exceptions.

Taking great care of your Toyota will make the lease-end process smoother. Of course, you won’t need to worry about normal wear and tear, meaning the expected decline in the condition of a vehicle due to normal everyday use. To ensure you don’t exceed normal wear and tear, TFS offers Excess Wear & Use Protection and flexible, competitive service agreements, maintenance plans, and a variety of voluntary protection products to help keep you covered down the road, all of which take the worry out of enjoying your Toyota.

Worry-free, well informed and happy. At TFS, we’re committed to making your Toyota experience all of that, plus safe and lots of fun.  

The information in this blog is offered for informational purposes only. Any product names, logos, brands, images, and other trademarks featured or referred to within the Toyota Financial Services (TFS) website are the property of their respective trademark holders. These trademark holders are not affiliated with TFS and do not sponsor or endorse TFS, or any of its respective websites, products, or comments unless otherwise disclosed. TFS declares no affiliation, sponsorship, nor any partnerships with any registered trademarks unless otherwise disclosed. By clicking on a hyperlink contained within this blog, you may be directed to a third-party website and will be subject to the terms of that website, including those relating to confidentiality, data privacy and security.

Ready to get into a new Toyota lease?