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Everything You Need to Know About Short-Term Car Leases

Short-Term Car Lease - What You Need to Know
Austin Kilham

Austin Kilham

Updated May 20, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
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. Here’s what you need to know this type of auto lease, including:   
  • How short-term car leases work
  • Pros and cons of short-term car leases
  • Alternatives to short-term car leases

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. A short-term car lease 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.      

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 new 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. When you return the car, you may be asked to pay a lease disposition fee, which covers the dealer’s costs of putting the vehicle back onto the market to sell as a used car. 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. 

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 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 of renting a car versus a short-term lease 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 a lot 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: Pros & Cons of Each 

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. Having lower scores doesn’t mean that you can’t get a short-term car lease. It just means your monthly payments might be higher to compensate for the higher risk you present to the car 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. 

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 may be able to take over the remainder of a car lease from someone else. There are several companies — including swapalease and leasetrader  — that help connect people wanting to take over or get out of car leases. If the vehicle has already been leased for a year, monthly payments may be much lower than the original lease arrangement. Also, some fees, such as insurance, may have already been paid. Be sure, however, that you understand any restrictions that carry over from the original lease, such as operating limitations and excessive mileage charges that could increase the cost of the short-term 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.

Alternatives to Short-Term Car Leasing

The trade off to the flexibility provided by leasing is that you can end up paying a lot of 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 good 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: How to Shop for 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 your credit score improves. 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.

H2: Auto Loan Refinance Tips    

  1. Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto refi loan for you.
  2. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan.
  3. Generally, the newer your car, the lower the refi interest rate. This is because younger cars typically have a higher value than old or used cars — and the car serves as collateral for the loan.

Photo credit: iStock/praetorianphoto
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0222030

Frequently Asked Questions

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About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
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