If you need access to a set of wheels for a short period of time, say for a temporary job assignment, school, or a family situation, a short-term car lease may be a good option. Leasing a car for one or two years can be less costly than a long-term car rental and offers more convenience than Ubering everywhere.
However, short-term car leases tend to cost more than traditional car leases and don’t allow you to build any equity in a car.
Keep reading to learn more on how short-term car leases work, pros and cons of short-term car leases, and alternatives to consider.
Key Points
• Short-term car leases, often ranging from six to 24 months, provide flexibility for those who need a vehicle for a limited period.
• These leases can be a cost-effective option for individuals who want to drive a new car without the long-term commitment of a traditional lease.
• Short-term leases may come with higher monthly payments compared to longer leases due to the shorter contract duration.
• Mileage limits and wear-and-tear fees are common in short-term leases, so it’s important to understand and adhere to these terms to avoid additional costs.
• Alternatives to short-term leases include purchasing a used car, opting for a long-term lease, or refinancing your current car to adjust your payment.
Should I Lease a Car Short-Term?
If you only need access to a car for a year or two, a short-term car lease is worth considering. It can also be a good way to test out a new car before you commit to buying it. Just keep in mind that the shorter the lease, generally the higher the monthly cost will be. If you only need a car for six months or less, your best bet may be a long-term car rental.
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How Long Are Short-Term Car Leases?
What constitutes a short-term lease will vary, but in general, it’s anything under 24 months. Some car dealerships, however, may consider anything under 36 months to be a short-term lease. A traditional lease is usually 36 or 48 months.
How Do Short-Term Car Leases Work?
When you lease a vehicle, you sign an agreement in which you get the use of the car for a certain period of time in exchange for monthly payments. At the end of the period, you can return the car to the dealer, or in some cases, you’ll be offered the opportunity to buy it.
One of the chief benefits of a lease is that you don’t have to worry about selling the car when you’re done with it. Also, in many cases, the contract includes some repairs and maintenance, such as oil changes.
The shorter the lease, however, generally the more expensive it will be. Leases that are less than one year may be particularly pricey because the value of a vehicle depreciates most dramatically in the first year. Plus, any one-time fees will need to be paid within that year, rather than spread out over a longer lease period.
Short-term car leases are available through franchised car dealerships, but can be much harder to find than traditional car leases, so it’s a good idea to call ahead to make sure that they offer the term you want.
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Pros and Cons of Short-Term Car Leasing
Here’s a quick look at the pros and cons of short-term leases:
| Pros of Short-Term Car Leases | Cons of Short-Term Car Leases |
|---|---|
| May be less expensive than a long-term rental | You’ll need good credit to receive the best terms and rates |
| Less costly than buying a new vehicle every few years | Typically comes with yearly mileage limits |
Pros of Short-Term Car Leasing
There are a number of benefits to getting a short-term car lease. These include:
Potentially Less Expensive Than a Long-Term Rental
If you need a car for a year or more, leasing is typically a cheaper option than renting a car. However, the cost advantage will vary depending on exactly how long you need the car and where you are located. For example, if you’re in a city like New York or Los Angeles, where rental cars are in high demand, renting could turn out to cost more than leasing. However, if you’re in an area with relatively cheap rental car rates, the gap between leasing and renting may close.
Less Costly Than Buying a New Vehicle Every Three Years
If you’re someone who always likes to be behind the wheel of a new car with the latest technology and safety features, a short-term lease can be a good fit. The monthly payments for an auto lease are usually lower than for a loan on a new car.
Recommended: Leasing vs. Buying a Car: What’s Right for You?
Cons of Short-Term Car Leasing
While there are certainly advantages to short-term leases, there are also some drawbacks you’ll need to consider. These include:
Prime Credit Is Typically Required
In order to get the best leasing terms, you generally need good or excellent credit, also known as a prime credit. From a lessor’s perspective, the higher your credit score, the more likely you are to be able to make your monthly payments. Lower credit scores don’t automatically disqualify you from a short-term car lease; they may simply result in higher monthly payments to offset the increased risk for the dealer.
Mileage Limits
When you lease a car, you usually have a yearly mileage limitation, since high mileage lowers a car’s resale value. These limits typically range between 12,000 and 15,000 miles per year. If you go over your limit, the dealership will often charge you a fee that allows them to recoup the lost value.
It may be possible to negotiate higher mileage on a leased vehicle, but you will likely have to pay more per month.
Set Terms
With a short-term lease, you will be limited to the time period stated in your contract. If you end up needing the car for less time, you will have to cancel your contract and could end up having to pay a high termination or cancellation fee. Should you realize you need the car for longer than the term of the lease, you may have to sign up for a pre-set car lease extension, such as six months or a year.
Recommended: Guide to Lease Disposition Fees
Short-Term Car Leasing Options
Lease deals under three years aren’t always easy to find. Fortunately, there’s more than one way to get a short-term car lease. Here are some avenues to consider.
Taking Over Someone’s Lease
You can take over someone else’s car lease through companies that facilitate lease transfers. If the car has been leased for a year, monthly payments may be lower, and some fees may already be paid. Make sure to check for restrictions like mileage limits or other conditions from the original lease.
Ending a Lease Early
Another option is to get a traditional lease and then get out of your car lease early. You could do this through the dealership, which will likely involve paying a contract termination or cancellation fee. Or, you could post your lease on one of the sites listed above to find another person to assume it and relieve you of the monthly payment.
Long-Term Car Rental
Many car rental companies offer long-term rentals. The max is often 11 months, but if you need a car for longer than that, you could get a couple rentals in succession. Extended car rentals typically offer lower daily rates than weekly or daily rentals, and don’t require a credit check. Car rentals also offer more flexibility than leases.
Recommended: Can You Extend a Lease on a Car?
Alternatives to Short-Term Car Leasing
The trade off to the flexibility provided by leasing is that you can end up paying more money, yet never build equity in the vehicle. Here are some alternatives to short-term leasing you may want to consider.
Getting a Car Loan
One alternative is to get a loan to purchase a used car — one that is known to hold its resale value — and then resell it when you no longer need it. When you finance a car, you’ll take out a loan for the price of the vehicle and repay it in monthly installments with interest. Downpayment, terms, and interest rates will be determined by your credit score. The higher your score, generally the better your terms and the lower your interest rate.
Recommended: Smarter Ways to Get a Car Loan
Refinancing a Car Loan
If you already have a car and a loan, you may want to consider keeping your current car, but refinancing it to make the payments more affordable. When you refinance a car, you pay off your old loan with a new one, ideally with better terms or a lower interest rate. The benefits of refinancing your car include making monthly payments more manageable and/or reducing the total cost of the loan.
Good times to consider auto loan refinancing are when interest rates drop and/or you’ve built your credit score. Even if you have to drive or ship your car to a temporary location, it could be a more cost-effective solution than getting a short-term lease.
Recommended: How Much Does It Cost to Refinance a Car?
Buying a Car in Cash
Buying a used car in cash is often the cheapest way to purchase a vehicle, since it eliminates the need to pay any interest. Paying in cash also gives you some negotiating power with the dealer — they know you are a serious buyer and both they and you know what your limit is, providing a ceiling at which you’ll simply walk away from a deal.
The Takeaway
If you need a car for less than three years, you may want to consider getting a short-term lease. This allows you to drive a new vehicle and can be less costly than a long-term car rental. However, short-term auto leases tend to be more expensive (and are harder to find) than traditional car leases.
Alternatives to a short-term car lease include buying a used car that will hold its value then reselling it when you no longer need it, and refinancing a car you already own in order to make your payments more manageable.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
How long is a short-term car lease?
It typically lasts anywhere from six to 24 months, though some dealers may consider leases up to 36 months to be short-term.
What are the benefits of a short-term car lease?
A short-term car lease may come out cheaper than a long-term car rental. It also gives you the opportunity to drive a new car with the latest technology and safety features.
Is short-term car leasing a good idea?
A short-term car lease can be a good option if you only need a car for a year or two. For longer stretches, you may want to consider buying a car or refinancing a car you already own.
Photo credit: iStock/FG Trade Latin
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