What Is a Subvented Lease?

A Subvented Lease Explained in Less Than 5 Minutes

A subvented lease is a lease with incentives such as a lower interest rate.
A couple talks with a car salesperson.

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When buying a vehicle, a subvented lease means the leasing company gives you a special discount. The discount could come in the form of a lower interest rate, or you could get lower monthly payments via a higher residual value. Subvented leases can lead to lower upfront or monthly costs, but they are usually only available to borrowers with excellent credit.

Learn more about subvented leases and how they work.

Definition and Example of a Subvented Lease

A subvented lease is a lease with incentives such as a lower interest rate. Typically, you’ll need excellent credit to obtain a subvented lease.

In some cases, the dealer’s subvention program may increase the car’s residual value so you can get lower monthly payments. For example, let’s say you’re planning to lease a $22,000 car with a residual value of $10,000 after 36 months. Since the car is expected to depreciate by $12,000, that means your monthly payment will be $333. If the dealer increases the residual value to $13,000, this lowers your payments to $250 per month.


Residual value is the value a vehicle is expected to have at the end of the lease term.

How Does a Subvented Lease Work?

In a typical lease, you’ll make monthly payments based on the value of the car. This value is determined by subtracting the expected resale value at the end of the lease from the current price of the vehicle.

Subvented leases may be offered by dealerships on inventory they need to move quickly, or for low-demand models. When you take out a subvented lease, you could receive a discount on the APR or price of the car, or get lower monthly payments.


Subvented leases may not be available for every car.

Types of Car Leases

If you’re interested in leasing a car, a subvented lease is not your only option. Here are four leasing options to consider.

Closed-End Leases

A closed-end lease is a common type of consumer lease. If you take out a closed-end lease, you agree to the contract for a fixed period of time. Once the lease is up, you’ll return the vehicle to the dealership.

During the lease contract, you’re responsible for staying within the predetermined mileage limits. You also have to keep up with scheduled maintenance. If you don’t stick to the terms of the lease contract, you may end up paying extra charges.

Open-End Leases

An open-end lease is less common than a closed-end lease. If you travel frequently, this lease may be an attractive option for you. That’s because open-end leases don’t come with mileage restrictions. However, your monthly costs may be higher with an open-end lease. At the end of the lease, if the vehicle is below market value, you’ll have to pay for depreciation costs.

Single-Payment Leases

If you take out a single-payment lease, you pay a large upfront sum rather than making periodic payments. This payment method should result in an upfront payment that’s less than the amount you’d pay if you made monthly payments.

If you have the cash, there are advantages to taking out a single-payment lease. Since you’re paying upfront, you’re reducing the lender’s risk. As a result, you’ll get a lower interest rate and better approval odds than if you asked for a closed-end lease.

“Option to Buy” Leases

Some leases give you the option to purchase the vehicle at the end of your contract. This is known as an “option to buy” lease. However, you need to negotiate this option at the beginning of your lease contract.

Buying vs. Leasing

If you are looking to get a new car, you may wonder whether you should lease or buy the car. There are pros and cons to both options. Here’s a look at some of the main differences:

Buying Leasing
You purchase the asset either through financing or one upfront payment You’re borrowing the asset for a fixed amount of time
Financing payments tend to be higher Monthly payments tend to be lower
Unlimited customization options Some customization options are available at the beginning of your lease
No wear and tear charges You’ll have to pay for excess wear and tear

When you lease a vehicle, you’re borrowing that car for a fixed time period—usually around two to five years. The advantage of leasing is that your monthly payments typically will be lower than financing charges.


If you’re unsure whether you should lease or purchase a vehicle, use an auto-loan calculator first. That way, you can see what kind of interest rate you can expect to receive and your estimated monthly payments. This information can help you determine whether leasing or buying a car is a better deal.

However, your customization options will be more limited, and you’ll have to pay for excessive wear and tear. And at the end of the day, you don’t own that car.

On the other hand, if you buy a car, you own that asset. You have unlimited customization options and won’t have to pay for wear and tear. However, if you finance the purchase, your monthly payments will likely be higher.

Key Takeaways

  • When you take out a subvented lease, the leasing company offers you a special discount on the vehicle.
  • Dealerships usually offer subvented leases when they are trying to move inventory, or for less-popular models.
  • You’ll need excellent credit to qualify for a subvented lease.
  • Taking out a subvented lease can save you quite a bit of money on your lease.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Board of Governors of the Federal Reserve System. "Keys to Vehicle Leasing: Types of Leasing." Accessed Jan. 10, 2022.

  2. Altra Federal Credit Union. "Auto Buying vs. Leasing." Accessed Jan. 10, 2022.

  3. Board of Governors of the Federal Reserve. "Keys to Vehicle Leasing: What's Negotiable?" Accessed Jan. 10, 2022.

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