Subvented Lease

AAA

DEFINITION of 'Subvented Lease'

A type of lease where manufacturers will reduce the cost of the lease through a subsidy, usually through the increase of the residual value or the decrease of the interest rate. These subsidies reduce the monthly payments that the lessee is required to pay over the life of the lease. Auto manufacturers often will offer a subvented lease on vehicle models that are not selling well.

INVESTOPEDIA EXPLAINS 'Subvented Lease'

For example, imagine that you were going to lease a car that is worth $20,000 and has a residual value of $5,000 after four years. Over the four-year period the car is expected to depreciate by $15,000, which would make your monthly payments $312.50 ($15,000/48) - we assume no cost of borrowing for simplicity sake. The car manufacturer could offer a subvented lease on the car by increasing the residual value to $7,500, which would decrease your monthly payment to $260.42 ($12,500/48).

RELATED TERMS
  1. Lease

    A legal document outlining the terms under which one party agrees ...
  2. Lessee

    The person who rents land or property from a lessor. The lessee ...
  3. Lessor

    The owner of an asset that is leased under an agreement to the ...
  4. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
Related Articles
  1. Home & Auto

    New Wheels: Lease Or Buy?

    These two major ways to obtain a car have very different advantages and drawbacks. Find out which is best for you.
  2. The annual percentage rate, or APR, is the cost per year of borrowing.
    Credit & Loans

    What's the Annual Percentage Rate (APR)?

    The annual percentage rate, or APR, is the cost per year of borrowing. By law, all financial institutions must show customers the APR of a loan or credit card, which clearly indicates the real ...
  3. Before you sign up for a car title loan, investigate these 8 alternate strategies.
    Credit & Loans

    8 Top Alternatives to Car Title Loans

    Before you sign up for a car title loan, investigate these 8 alternate strategies.
  4. Credit & Loans

    What are the different types of cash advances?

    Find out the different types of cash advances along with their different features to determine which option, if any, is best for you.
  5. Credit & Loans

    Is it better to get a balance transfer or a personal loan to pay off my credit card debt?

    Find out what you should consider before deciding to pay off your credit card debt by taking out a personal loan or using a balance transfer to another card.
  6. Credit card balance transfers can help pay off debts – but they can cost you. Here are some other approaches worth checking out.
    Credit & Loans

    4 Debt-Busting AlternativesTo Balance Transfers

    Credit card balance transfers can help pay off debts – but they can cost you. Here are some other approaches worth checking out.
  7. Sometimes you can find a better deal than a cash advance – but some alternatives are even more pricey. Where to find the cheapest source of quick cash.
    Savings

    8 Quick-Cash Alternatives To Credit Card Advances

    Sometimes you can find a better deal than a cash advance – but some alternatives are even more pricey. Where to find the cheapest source of quick cash.
  8. Short article explaining the basics of Cash Advances, how the work, who to obtain them and what are some of its main characteristics - Unbiased and only informative
    Savings

    Before You Take That Cash Advance

    Understand who benefits most from cash advances – and when it might make sense to get one.
  9. The reason why companies offer 0% balance transfers, how they benefit from it and why should a person be careful with this.
    Credit & Loans

    0% Balance Transfers: Can You Beat the Odds?

    Before you accept that 0% balance transfer offer, understand why you got it and who will probably profit most. Only accept if you can beat the odds.
  10. The 0% introductory interest rate on balance transfers is a common perk of credit cards targeted to consumers with good to excellent credit.
    Credit & Loans

    The Credit Card Balance Transfer Trap

    Before you transfer a balance to a credit card with a lower interest rate, know how it affects new purchases and other fine-print traps that can cost you.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center