Long-Term Car Leases
If you're getting into the process of leasing a new vehicle, you'll want to understand the difference between long-term and short-term car leases.
While there is no industry definition for a long-term lease, we consider a long-term lease is one that extends longer than 24 to 36 months (common car lease terms), and can last for as long as 5 years.
The most important thing to remember when considering leasing terms it that longer lease terms come with different advantages and disadvantages as compared to shorter lease terms.
Advantages of a Long-Term Lease
Leasing—whether short-term or long-term—includes several advantages, many of which are especially appealing if you want to drive a nicer car. You typically get all the warranties and benefits of buying a new car, without paying hefty down payments.
There are a few additional advantages to a long-term lease offers over short-term leases:
- Lower monthly payments:
- If you extend your lease out a few months or even an extra year or longer, you will find it easier to negotiate lower monthly payments.
- More miles to drive:
- Lease agreements always limit the number of miles you can put on the vehicle. However, if your leasing term is longer, the dealership should make an allowance for the higher number of miles you'll put on your car during that extra time.
- Improve your credit:
- The longer you are in good standing by making your lease payments on time, the better your credit score will be at the end of your lease agreement. Extending it out a few months or a year or two might help you get a better interest rate as well.
Disadvantages of a Long-Term Lease
As with any financial agreement, there are also disadvantages to long-term leasing that are worth understanding and weighing against the benefits.
- Higher overall cost:
- Even though you may be able to negotiate lower monthly payments, you will in all likelihood pay more overall for the vehicle. This is because you will be paying interest for a longer period of time, albeit on a lesser amount of money.
- Expensive repairs and maintenance:
- Most car manufacturers have warranties that expire after a few years. If you're leasing a car for longer than the warranty covers, you may find yourself having to pay for repairs or replacement of certain car parts.
- Wear and tear penalties:
- At the end of a lease, you are expected to return your vehicle in nearly new condition. The longer you have the car in your possession, however, the higher the risk you'll dirty or damage something and have to pay fines for excessive wear and tear.
- Mileage fees:
- While your mileage may be slightly increased for a long-term lease, the longer you're leasing, the greater the risk you'll have to pay the leasing company for the number of miles you have gone over.
If you think leasing is right for you, consider both the pros and cons of long-term leasing carefully before you sign your contract. Once you're in your lease, terminating a lease early can be tough and costly.