Leasing is a popular way of getting behind the wheel of a car, truck, or SUV with all of the latest technology, safety advances, and connectivity options. Even better, you can do so for less than the price of buying a car. As a bonus, you can get a new car each time you reach the end of your lease. According to the credit reporting agency Experian, about one in three vehicles leaving dealer lots today are leased, and not purchased.
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While the majority of leases are written for three or more years, some consumers are looking for shorter commitments, ranging from just a few months up to two years. Can you lease a car for a term that short? The answer is yes, but it might not offer the money savings you expect. In this guide, we’ll help you understand the ins and out of short-term leasing and show you some alternatives.
- What Is a Short-Term Lease?
- Where Can I Find Short-Term Leases?
- Why Are Short-Term Leases Expensive?
- Short-Term Lease Alternatives
There’s no hard and fast rule about what constitutes a short-term car lease. By most measures, it’s a lease that lasts two years or less. At the shorter end of the spectrum, it can be confusing where long-term car rentals end and short-term car leases begin. There’s no clear-cut answer, but we’ll describe the pros and cons of each a bit later in this article.
In general, the shorter the new car lease you want, the harder it will be to find and the more you’ll pay each month. Fortunately, there are a couple of options that don’t involve entirely new lease contracts. We’ll discuss lease assumptions and automotive subscription services toward the end of this guide.
Why Would You Want a Short-Term Car Lease?
There are many situations where a short-term lease might seem like a good idea. They include a job assignment where you’re only going to need a car for a couple years, a temporary military deployment that requires reliable transportation, a family issue where you need to have a vehicle to transport family members, or a training or educational opportunity.
Some car buyers consider short-term leases as a way to check out a car they're thinking about. In general, that months-long test drive is a very costly way to become familiar with a vehicle. There are better ways to learn about vehicles, such as renting one on a family vacation.
Two Year Car Leases
A 24 month car lease is typically more expensive than a three-year contract, but less costly than a one-year lease. Unlike a shorter lease, you'll have a much easier time finding a two-year lease at an auto dealership.
Another benefit of having a car lease with a longer term is the availability of automaker-supported lease deals. When vehicles are reaching the end of their product cycles or aren't selling well, automakers support their sales with special lease deals that have low monthly payments, little due at signing, or a combination of both. There are many 36 month lease deals available from automakers but not too many 24 month lease deals.
You can find the best current lease offers on our lease deals page.
One Year Car Leases
While it is possible to get a one year car lease, it is generally not recommended. Because vehicles depreciate so quickly during their first year on the road, leasing for one year can be very expensive. You’ll also be responsible for paying all of the lease’s one-time fees, such as registration, within one year, rather than spreading those costs over multiple years.
You can find out more about one year car leases from this article.
Short-term leases can be hard to find. Manufacturer-sponsored 24 month lease deals are rare, and most new car dealerships don't write contracts with lease terms of less than two years. The best way to find a dealership that’s willing to write a short-term lease contract is to go online and contact the internet sales manager at several dealerships.
Once you have found a dealership willing to make a short lease, you’ll want to know how to negotiate the best deal. Our guide to negotiating a car lease provides some great tips to get you started. In short, you don’t want to focus on the monthly payment. While the payment certainly needs to fit within your monthly budget, the price of the car (its capitalized costs) and the interest rate (money factor) are the more important numbers to negotiate.
You can explore our lease deals page to find the best 24 and 36 month lease deals.
To understand why short-term leases can be so much more expensive in the long-run than longer contracts, it's important that we go back and look at how leasing works.
Car buyers have to pay the entire cost of a car and generally will take out a car loan to pay for the purchase. Lessees, on the other hand, only pay for the portion of depreciation that is expected to occur during the time they are leasing the vehicle, plus interest and fees.
That portion of deprecation is the difference between the price of the car (its capitalized cost) and the amount that the vehicle is predicted to be worth at the end of the lease (its residual value). While the residual is set by industry experts and is not negotiable, the capitalized cost (car price) is negotiable. Lease customers should be prepared to haggle over the capitalized cost, just as they would the car’s price if they were buying it.
Here’s why short-term leases can be so much more expensive than other leases: vehicles don’t depreciate at the same rate throughout their lives. They usually depreciate the most during the first year they are on the road, less during the second year, and even less through the rest of their operating life. The math simply works against short-term lease customers.
Let’s say, for example, that you want to lease a $40,000 SUV that’s expected to depreciate 20% in year one, 15% in year two, and 10% in each ensuing year. That means there’s $8,000 in depreciation the first year, $6,000 the next, and $4,000 in the third. When you lease for two years, you have to pay $14,000, plus fees and interest, broken down into an amount due at signing and monthly payments. That averages out to $7,000 per year.
Lease the same vehicle for three years, and you have to pay a total of $18,000 in depreciation, but since you pay it over three years, the average you pay per year is $6,000 plus fees and interest. That’s $1,000 less per year (about $83 less per month) than you would have to pay with the two year lease.
Today, there are alternatives to short-term leases. There are easy ways to take over someone else's lease or subscribe to a car just as you do your cell phone. Certified used vehicles provide an affordable purchase alternative.
Long-Term Car Rentals
Large national companies, such as Hertz, Enterprise, and Budget Rent-A-Car, offer long-term rentals, as do smaller, local rental agencies. It’s much like a short-term car rental you would purchase for an out-of-town vacation.
Renting a car for several months has advantages over a short-term lease, but a few limitations, as well. Renting a car is easy, even if you have bad credit. As long as you can demonstrate your credit is good enough to pay the monthly fee, or you have a credit card with a decent limit, you can rent a car. Unlike leases, there’s typically no down payment or other fees when you take out a rental.
Rental customers aren’t responsible for paying for the vehicle’s registration, maintenance, roadside assistance, or repairs. If something goes wrong with the car, they can swap if for another. Though every rental contract is different, some allow unlimited miles. That's a benefit you'll rarely see on a lease, which generally come with a mileage restriction. Most rental agencies allow you to pay by credit card, so if you are disciplined and pay off your balance in full each month, you can potentially pile up some frequent flyer miles or other credit card rewards without paying any interest.
Returning a rented car early usually isn’t an issue, though you might have to pay a daily or weekly rate for any partial months of a multi-month agreement. That’s different than a lease, where you face substantial financial penalties if you try to return your vehicle early.
With all of the services and benefits that a rental car includes, it might seem that a long-term car rental would be more expensive than a short-term lease. However, it's impossible to give a blanket answer to which is more costly. Many rentals cars aren't brand new, and the rental car company likely received a massive discount on the purchase price. Like a carmaker with special new car deals, rental car companies with excess stock may run rental deals when demand is slow.
Before you commit to a car rental, check the rates at multiple national rental companies as well as local car rental agencies. Be sure to check at off-airport locations and in multiple counties. Some airports and local jurisdictions charge taxes and fees on car rentals to gain revenue from tourists.
There are a couple of significant downsides to long-term auto rentals compared to short-term leasing. When you lease a car, you get to decide on the model, trim level, options, and the color. When you rent a car, you’ll have to be happy with what they have in stock.
Some car rental companies are limited by state laws or internal policies on how long they can rent cars for. In some cases, you’ll have to visit the rental car agency occasionally to renew your rental contract. You may have to change vehicles as part of the renewal process.
If you don’t own a car and have an insurance policy, it can be more difficult and potentially more expensive to insure a rental car. Many car owners’ auto insurance policies cover rental cars, though there may be a time limit on the rentals they cover. If you don’t have an existing policy, you may be forced to buy the insurance the rental car company offers, which can be very expensive. Though many credit cards have an auto insurance benefit, many have limits on the length of coverage they will provide.
We've discussed earlier in this guide that it can be expensive to try to get out of a lease early. If you need to, one of the best ways to do so is to transfer the remaining months of your contract to another person. It's called a lease assumption. For consumers looking for a short-term car lease option, a lease assumption may be one of the most affordable paths available.
While lease assumptions have been around for years, finding the right match used to be challenging. Fortunately, the internet has come to the rescue, with sites such as SwapALease.com and LeaseTrader.com acting as the Tinder to match people wanting to get rid of leases with those seeking short-term contracts. The sites allow you to shop for cars in your area that have just the right time and mileage remaining on their original leases. Lessees who are trying to jettison their current leases pay the website a fee to list their cars and help facilitate the lease transfer. In some cases, the original lessees will be desperate enough that they'll throw in some cash or other incentives if you take over their lease.
Of course, assuming a lease isn’t as simple as just taking over the payments. Like a used car purchase, you’ll want to check out the car’s vehicle history report and get a thorough inspection by an independent mechanic. You’ll likely be on the hook at the end of the lease for any excess wear or damage, regardless if it happened before or after you assumed the lease.
The original lessee’s leasing company will also have to sign off on an lease assumption. Attempting to perform a lease assumption without their approval could be considered a lease default, giving them the right to demand the immediate return of the car.
There’s a new way of getting behind the wheel. It’s called a car subscription, and it allows you to pay a monthly fee to have a car. In many cases, the subscriptions are all-inclusive, covering repairs, maintenance, auto insurance, and roadside assistance. Most of the automaker-sponsored programs currently available are from luxury brands, plus several are only being tested in specific locations and are not available nationwide.
Many of the car subscription services offered by carmakers come with steep monthly price tags, though the benefits can be outstanding. Some allow you to swap cars on demand, so you can, for example, get a full-size SUV for a family vacation, then return to a midsize sedan for your daily needs.
There are other car subscription services from third parties that deal in used vehicles. They can be an affordable option, with a blend of the benefits of short-term car leasing and a monthly car rental. Canvas, a division of Ford Motor Credit, is an example of a car subscription service that uses a fleet of lease return vehicles.
It's essential to read the fine print on any car subscription offer. Some have terms as short as a month, while others require a commitment of a year or more.
You can learn more with our guide to car subscription services.
Certified Used Cars
If the reason you’re considering a lease is to keep the monthly cost low while enjoying the protection of a warranty, the purchase of a factory-certified used car (CPO car) is another option you should consider. Certified pre-owned vehicles are typically low-mileage, late-model vehicles that are in good shape and are sold with a warranty provided by the automaker. CPO cars have higher price tags than similar non-certified used cars but come with the security of knowing you won't be on the hook for expensive repairs.
Of course, if you buy rather than lease, rent, or subscribe, you’ll have the hassle of selling your used car when you no longer need it.
You can learn more with our guide to CPO cars.
More Shopping Tools From U.S. News & World Report
However you choose to get your next car, U.S. News & World Report has resources to help you find the right car for the right price. A great place to start your car buying or leasing journey is our new car rankings and reviews page. Using the consensus opinion of the country’s top automotive journalists fused with quantifiable information about safety and predicted reliability, we strive to answer the questions car buyers are asking. Our rankings show how different models stack up against their peers.
Leasing a car might seem simple in concept, but it takes some knowledge to do it successfully and affordably. Our guide to leasing a car, plus our articles on leasing mistakes to avoid and vehicles with great residual values can give you the information you need to lease a new vehicle confidently.
With any auto lease or purchase, you’ll need auto insurance. The U.S. News Best Cars auto insurance hub shows you the coverage you need for your new ride, car insurance discounts you may qualify for, and the best insurance companies to work with.