Leasing makes sense for many consumers. It offers a chance to get a new car with all of the latest safety and connectivity options for a price that’s much lower than buying a car. When the lease is up, you just return the leased vehicle to the dealer and walk away, or sign a new lease contract on another vehicle.
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But what if you only need a vehicle for a year? The answer gets complicated, and potentially expensive. In this guide we’ll look at the pros and cons of different approaches to getting a car for a year.
- Can You Get a One Year Car Lease?
- Downsides of One Year Car Leases
- Pros of One Year Car Leases
- Alternatives to One Year Car Leases
Yes, you can lease a car for one year, but it’s not usually a good financial decision to do so. Much of a car’s depreciation occurs in the first year. For the leasing company to be able to make money, they’re going to have to charge a very high monthly payment. For that reason, a one year car lease will be expensive.
One of the biggest challenges in getting such a short-term car lease is finding a dealer willing to give you one. Most new car leases are written for a minimum of two years (24 months), with a three-year (36 month) leases being the most common. A good way to find a dealer willing to set up a one year lease is by contacting the online sales manager at several dealerships, rather than making a multitude of phone calls or driving from car lot to car lot.
If you do find a dealer that is willing to create a one-year lease for you, you’ll want to negotiate the terms just like any other lease, with the understanding that your payments will likely be much higher than with longer leases.
Doing the math to determine the total cost of a one year lease can be difficult, as most lease calculators (including ours) don’t work with lease terms shorter than two years.
One thing you won’t find is a money-saving manufacturer-sponsored lease deal on a one year lease contract. Deals on two-year leases are increasingly rare, and they are simply non-existent on one year leases.
There are several issues with the idea of leasing a car for one year. First, it can be challenging to find a dealer or leasing company willing to write such a short-term car lease.
Additionally, the monthly payments on a one year new car lease can be extremely high compared to those on a two- or three-year lease contract. That’s because cars, trucks, and SUVs depreciate rapidly during their first year on the road, a bit less during their second year, and much less during the ensuing years. By leasing for just the first year, you have to pay a massive portion of the vehicle’s depreciation.
Here’s an example: We’ll say you’re looking at a compact SUV with a price tag of $30,000. It’s expected to depreciate $7,000 in the first year, $4,000 in the second, and $2,000 in the third. Lease it for just the first year, and you’ll be responsible for $7,000 in depreciation, plus interest and fees. That $7,000 plus interest and fees will give you a massive monthly payment that could easily exceed the monthly payments you might pay if you were buying the car with a five-year loan.
Lease the same vehicle for three years, and you’ll be responsible for a total of $13,000 in depreciation, plus interest and fees, spread out over 36 months. That’s an average depreciation of $4,333 per year plus interest and fees, which would produce dramatically lower monthly payments.
Lease contracts tend to come with a variety of fees. With a multi-year lease, those costs are spread out. When you lease for just a year, all of those fees are compressed into that single year. If you lease another car the following year, you’ll have to pay them all again on that next car. Examples of those fees include state licensing or registration fees, which in some states cover two to four years. You don’t get a price break if you only need the registration for a single year.
Why might you want to get a one year car lease? There are several reasons, including temporary job assignments, military temporary duty stations, family situations that force you to relocate for a short time, and education or career training opportunities.
One year business opportunities where the entire cost of the lease can be expensed as a business cost can be a good reason to lease for a short term.
Another reason is the opportunity to try out a type of car before committing to a longer lease or purchase. As we’ll discuss in the next section, a short-term lease is a horribly expensive way to take an extended test drive.
There are a few alternatives to one year leases that are potentially more affordable.
Renting a car for as long as a year can be almost as simple as renting one for your family’s week-long beach vacation. Unlike with many leases, when you rent a car there’s no down payment. You typically won’t have to pay for registration, preventative maintenance, or wear and tear. Depending on the rental company you choose, there may be no mileage restriction.
Leasing a car is typically reserved for consumers with excellent credit. Long-term car rental companies will just look at your ability to pay for the term of the rental, not all of the costs of a lease, so buyers with less than perfect credit may qualify to rent a car when they would not be eligible to lease.
If something goes wrong with a car you are renting, many companies will allow you to swap for a different vehicle in the same rental class.
When you lease a new car, you get to choose the specific model, trim level, options, and color. Car rental customers will typically find their options limited to whatever is on the rental lot, and they may get a car that is a year or more old. The rental company is responsible for all of the maintenance, registration fees, and unexpected repairs. Because there are so many variables involved, it’s impossible to say whether a one year lease or a long-term car rental will be more affordable. Experts recommend getting prices from multiple rental car companies, including local agencies and national companies such as Hertz or Budget Rent-a-Car, before committing to a rental.
With some rental car companies, there are maximum rental lengths. You need to return to their office before the end of each term to get a new rental contract, which may have a different price than your original rental period. Depending on the specific location where you get your car rental, you may have to pay additional taxes and fees related to airport concessions, local tourism assessments, and other costs designed mainly for visitors.
Getting auto insurance for a rental car can be complicated, especially if you don't have an existing policy on another vehicle. Be sure to check with your insurance agent about your options before you commit to a long-term rental, so you can avoid the expensive insurance products typically offered by car rental companies. The rental car insurance provided with many credit cards is usually limited to short-term rentals and won’t cover multi-month contracts.
Laws that define rentals versus leases vary by state, so you’ll need to check with local rental car companies find out how long they can rent for without running afoul of state laws.
It can be very costly to get yourself out of a lease you can’t afford or don’t need anymore. To address this need, a marketplace has emerged where people can advertise to jettison their current lease, and others can take over the remaining term of the lease. The technical name for the transaction is called a lease assumption.
Taking over the final year of a lease can be a great way to save money, as the payments you’ll make will be based on the total length of the lease, and not just a single year’s depreciation. Often, people are desperate to get rid of their old leases and will add extra incentives to get someone else to assume them. Of course, the car will be a couple of years old, and you’ll want to get a vehicle history report and an inspection from an independent mechanic to make sure there are no problems you would have to pay for at the end of the contract.
Websites such as SwapALease.com and Leasetrader.com provide a place for consumers who want to get out of their leases. The consumers can also advertise their vehicles and current lease details. The websites can help to facilitate the transfer of the contract and are compensated by the party listing the lease for doing so.
Lease assumptions are much more complicated than just agreeing to take over someone else's payments. The leasing company has to approve the deal and, in most cases, approve the creditworthiness of the person assuming the lease. In some cases, the original lessee is completely off the hook once a new person takes over the contract, while in others they are responsible for the lease payments if the person assuming the lease doesn't make them.
If you are approached by someone trying to get rid of their lease by just having you make the payments, without any lease transfer paperwork, you need to decline the offer. Most leasing companies would consider such a transaction to be a violation of the original contract and could demand the immediate return of the vehicle and the fulfillment of any payments remaining on the lease.
One of the newest ways to get a car for a short time, without the hassle of buying then disposing of a vehicle, is a new car subscription. With many vehicle subscription programs, you pay a monthly fee that covers almost everything related to the car, from maintenance to insurance. You still pay for gas, but that's about it.
Many of the subscription programs offered by automakers allow you to swap vehicles during the subscription. For example, if you want a Mercedes-Benz GLE SUV for your ski trip, you can swap out your E-Class for a while. Most of the programs offered by carmakers come with hefty price tags that can run into the thousands of dollars per month. Not every program is available in all markets.
The length of subscription commitments varies by manufacturer, so be sure to read the fine print before you pledge to be part of a program.
In addition to car subscription services from automakers, there are third-party car subscription programs. Many use fleets of lease return vehicles that are a few years old. Some include insurance, while others don't. They do offer a flexible way to affordably get into a car without a long-term commitment.
Canvas, a part of Ford Motor Credit, is another model that’s being tested in some markets. It provides a fleet of lease return models, insurance coverage, and maintenance. You can choose subscription lengths from one to 12 months, with longer terms offering more favorable pricing. Upgraded plans that just include Lincoln vehicles are available.
You can learn more with our guide to car subscription services.
An Option You Should Not Consider
Some people might think that taking out an affordable three-year lease and then returning it after just one year is a good idea. It's actually an awful plan that can cost you a lot of money and damage your credit score.
Leases are legally binding contracts. Failure to abide by all of the lease conditions – including making your payments for the full term of the contract – is grounds for lease default. Even if you try to get out of your car lease early through a lease swapping process, some leasing companies can still hold you to the original lease terms if the person who assumes your contract does not make their payments.
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