Why Your Monthly Payment Should Match the Way You Drive
Most people assume a car payment is a car payment. You borrow money, you pay it back, and the number you land on depends on your credit and how much you put down. That assumption costs a lot of drivers more than they realize.
In the second episode of Inside the Lease, Kelly Strausser, COO of D&M Leasing, and Chase Kennemer, President of D&M Leasing in Fort Worth, break down how lease payments are actually calculated and why the way someone drives matters more than most people think.
The foundation of any lease is something called a residual value. That is the guaranteed future value of the car at the end of the lease term. Rather than paying a car down to zero the way a traditional loan works, a lease payment covers only the depreciation — the difference between what the car costs new and what it will be worth when the lease ends. On a $50,000 car with a residual value of $25,000, the customer is financing $25,000 worth of depreciation, not the full purchase price. That is why lease payments are typically lower than loan payments on the same car over the same period.
The residual value is not a guess. D&M Leasing uses extensive data sets to determine what a specific car will be worth at a specific point in the future, and then backs that guarantee with insurance. That risk sits with D&M, not the customer. If the car is worth less than the residual at the end of the lease, the customer can hand back the keys and walk away. If it is worth more, the customer keeps that equity and can roll it into the next lease.
Mileage is where this gets more complicated, and where a lot of drivers end up in trouble.
A car depreciates the same regardless of how it is financed. More miles mean more depreciation. A driver putting 25,000 miles a year on a car is depreciating it significantly faster than someone driving 7,000 miles a year. If both drivers have the same monthly payment, one of them is not paying enough. The driver putting on heavy miles is essentially swiping a credit card of negative equity every month, building up a balance they will have to settle when they trade.
Leasing was actually created for high-mileage drivers. The structure allows a payment to be matched to how someone actually uses a car rather than a one-size-fits-all loan term. A properly structured lease for a high-mileage driver accounts for faster depreciation upfront so there are no surprises at the end.
The goal is simple. Every customer should be able to trade from car to car without carrying negative equity forward. That only happens when the financing is structured to match the way someone actually drives.
Inside the Lease is a video series focused on automotive finance education for Texas consumers.