Car Lease Term Comparison

The Right Car-Lease Terms
The Right Car-Lease Terms

What is the right car lease term? I’ve done 2-year car leases, 4-year car leases and 5-year car leases.  Oddly, I never have tried a 3-year car lease, which is probably the most popular and practical car lease today. Nearly all dealers, sales people and financial advisers will recommend a lease that is shorter than 4 years. There are some good reasons for this, which I will get into below, but there are also some drawbacks and disadvantages of short-term leasing that is often not mentioned or considered. Having had the experience of leasing so many different cars, I thought I would share my thoughts on the disadvantages and advantages of each of the different lease terms.

5-Year Car Leases (60-Month Lease)

5-Year car leases are not very common anymore. In the late 80’s and early 90’s, the five-year lease was a good option for me. I had my eye on a Toyota 4×4 Pickup and a Honda Accord LX, but I wanted to keep my payments around $250 or less. In 1987, I leased a brand-new Toyota 4×4, V-6 Pickup for only $237 a month and no money down. Then, in 1990 I leased a 1990 Honda Accord LX for $235 a month and nothing down. These turned out to be great cars and I never regretted making the monthly payments. In fact, I was able to trade the truck in after 3.5 years into the lease, and leased a Honda Civic in it’s place for just $205.00. I needed more seats and the Honda Civic was more practical for hauling kids and saving gas money. Because these were popular cars with extremely high residual values, I was able to significantly reduce my payments by getting into a longer term lease. Either the Truck or the Honda Accord cost about $20,000 at the time. At 7% interest, a five year loan would be around $400 a month. That’s $300 a month savings between both cars, and for a guy starting a new career and raising a family, that’s a significant savings. In fact, I would not have been able to afford $800 a month to drive two, new and reliable vehicles. Sure, I would have had about $6,000 of value in each of those cars after the loan was paid off, but they would have continued to depreciate and require maintenance. The drawbacks of the 60-month lease? Maintenance. Both vehicles needed new tires. Surprisingly, neither ever needed brakes. Besides Oil Changes, fuel and one, tire-change, I never spent a dime in repairs. The five-year leases worked out very good for me!

4-Year Car Leases (48-Month Lease)

My G6 48-month lease
My G6 48-month lease

I leased a  1996 Infiniti G20 for $237.00 per month, a 2000 Chevrolet Venture Mini-Van for $349.00, and a 2005 Pontiac G6 for only $177.00. These were 48 month leases, and though the payments were reasonable, the lease length is just a bit clumsy, in my opinion. All vehicles needed new tires about 3 years into the lease. All three vehicles also required brake work and additional repairs soon after the warranties expired. This left me thinking, “hmmm, a 3-year lease would have saved me on repairs” and, “gee, it sure stinks buying new tires for a car I’m going to turn-back in a few months. “ I didn’t want to risk the Colorado winter, though, with bald tires, so I put down a few hundred bucks and gritted my teeth. Having paid for a new alternator, tires and brakes on the Infiniti, I decided to keep the car and paid it off. GM made me an incredible loan offer to buy the Mini-Van for less than it’s stated residual value, so I purchased that one too. I turned the Pontiac Lease in without incident or further costs. I found it strange that GM had no interest in making me a better offer like they did with the Mini-Van, considering the slumping economy and excess inventory of unsold cars on dealers lots. Had my lease been for two or three years, I probably would not have kept any of them.

2-Year Car Lease (24-Month Lease)

2008 Hyundai Veracruz SE
2008 Hyundai Veracruz SE

What is the perfect car lease term? If a 48 and 60 month lease are too long, could a 24-month lease be too short? My answer is that it depends on your financial situation and how good of a deal you get. I leased a 2008 Hyundai Veracruz for $310 per month for 24 months, and that’s with the old, 2000 Chevy Mini-Van traded in as a down payment. Just for comparison’s sake, let’s say that I put the $2,000 trade-in down and purchased the Hyundai for $30,000. That would be a $554 a month payment that I would be making for 5 years. So, do I regret not buying it?: No, not for a minute. On the other hand, I cried when I turned the Hyundai in after just 2-years. We only put 19,000 miles on it and the tires were as good as new. Also, it was painful making those $575.00 and $475 registration payments in years 1 and 2, knowing we would be giving the car back so soon. In the case of the 24-month lease on my 2009 Subaru Legacy, I will be glad to be turning the car in another year and 3 months, so I can get another, needed  SUV to replace the Hyundai. Right now, I drive a used 540i Bimmer, so I have no need for two passenger cars. I leased the Subaru before this somewhat unusual deal on the Bimmer fell into my lap.  Though my $231 a month payment is nice, I really need an SUV or some other vehicle with cargo or storage capacity, rather than two passenger cars that serve the same purpose. My opinion aside from my own personal circumstances, is that 2-years is not enough time with a car. Not, when it still has that new car smell and you really enjoy driving it!

3-Year Lease (36-month or 42-month Lease)

This is what I will be looking for when I trade in my 2009 Subaru Legacy. 36 Months gives you the full length of most car warranties and no worries about brakes or tires. The second best choice, though it is hardly available anymore, is the 60-month lease. With the 60 month lease, you buy new tires and brakes after 3 years and enjoy it for another 2 years. This all depends, of course, on full financial considerations of the lease; low monthly payment, residual value, interest rate. As always, look at our Monthly Lease Offers and Car Lease Guide to compare your car offer with the specials that are available.