You may have preferences on a lot of details about your new car. The make, the model, the trim level. But you will have to decide on more than that when you choose to lease a car. You will also have to decide on the length of the lease, which you may be undecided on.
Let’s talk about the best length of time for a car lease and how you can decide what is right for you.
What is a lease term?
When you lease a car you are essentially renting the car from the dealership. The lease term is the amount of time that you agree to rent the car for. Some dealers offer short term leases, which can be 3 month, 6 month, 9 month, or 12 month lease terms. On the other end of the spectrum there are longer term leases that are 4 years. But it is much more common for dealers to offer 2-3 year leases.
When determining which lease term is right for you, you should consider the following:
- Your monthly budget for car payments
- How you intend to use the car and why you are leasing in the first place
The shorter the lease term is, the more expensive the monthly payments will be. Additionally, if you are leasing because you want to get a new car every few years, it doesn't make sense to get a longer lease.
What lease term should I choose?
Short term lease
Short term leases are not very popular, and for good reason. You will pay the most amount of money per month for a short term lease (and it may even be more expensive than financing). But there are still times when it may make sense to you. If you have another car that requires extensive repairs and you know you will need a car for several months, this may make more sense to you than a rental car. Rental cars charge by the day so they can quickly turn into a money hole.
2-3 year lease
These are the most popular lengths of car leases. They allow you to have the car for a decent amount of time while still giving you the benefits of leasing. Typically your warranty will last the entire period of your ownership, so you do not need to worry about expensive repairs. You will also find decent monthly payments by choosing 24-36 months. Choosing the 36 month lease will give you a better interest rate though.
Long term lease
Your other option is to select a long term lease, which is typically 4 years. This will give you the lowest monthly payments, although you do run the risk of outlasting your warranty or growing bored with the car before the lease is over.
How to decide
It simply comes down to your preference. Are you happy to pay a little more and get to trade your car in 2 years? Would you rather pay less every month and stick it out a little longer with your ride? Considering what is important to you and what you can afford will help you to make the right choice.
What happens at end of car lease?
No matter how long your lease term is, your car lease will eventually end. And then what? You will have three options at the end of your lease term:
- Trade in for a new lease
- Turn the car in and walk away
- Purchase your leased car from the dealership
Many people who lease like to have a new car every few years, and leasing allows them to do so with minimum stress. Trading in is a great option if you would like to continue leasing, haven’t gone over the mileage limit, and haven’t had major wear and tear on your car. You can simply return your car, pick out a new one, and sign a new lease agreement.
Turn the car in.
If you have decided that leasing isn’t right for you, you can simply turn your lease in and walk away. You will be responsible for any fees due to excessive mileage and excessive wear and tear, but beyond that you will be free to do as you wish. Maybe you do not need a car at all, or maybe you’d be happier buying a new or used car.
Buyout your lease.
Buying out your leased car is another popular option that might be right for you. Buying out your lease will allow you to purchase your car for the residual value that is listed in your contract. This is a great option if any of the following apply to you:
- The residual value of the car is less than the market value of the car
- You really like your car and you don’t want to part with it
- You have gone over the mileage allowance and will be responsible for overage fees
- You have significant wear and tear and will be responsible for fees
It is very common right now for residual values that are listed in the contract to be less than the market value of a car. This is because residual values are determined at the beginning of the lease and cannot be changed. The increased competition in the used car market has caused an increase in market value, so it is very common for the buyout price to be cheaper than the car’s value. This means that even if you do not want to keep the car you can buy your leased car and sell it for a profit. Getting a lease buyout loan is a great way to do this.
Or, maybe you just really like your car and don’t want to part with it. Buying your lease out is a great way to own the car that you love, and it is usually a very affordable option.
That’s everything you should know about car lease terms and how you can decide what lease term length is right for you.
Leasing a car is a popular option for many people, but it can be hard to decide how long of a lease term is appropriate. Taking a look at your needs and your budget can help you determine which lease term length is best for you. And when your lease ends, a car lease buyout loan can help you keep the car you love (or sell it for a pretty penny).
If you are interested in buying out your lease, contact Auto Approve today! Our agents can help guide you through the application process and find the car lease buyout loan that is right for you!