We were hoping you wouldn’t ask. We make more money when we manage to keep it all mysterious. Sigh. OK. Here’s the dope…

Leases actually aren’t mysterious at all, but since commercial leases often include things far beyond the vehicle itself (fleet management, maybe insurance or fuel, that sort of thing), they get confusing.

In the simplest terms, a lease is structured by:

• Subtracting the residual value from the cost of the vehicle, financing that difference – then charging a little bit of interest for carrying the residual value during the term of the lease.

In effect, you’re trading in a vehicle at the same time you bought it, and paying some interest for the privilege of getting the trade-in value at the same time you get the vehicle.

*Read this article to find out what on earth a residual value is.