What Is a Short-Term Car Lease?

Definition & Examples of a Short-Term Car Lease

Visiting the car dealership
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A short-term car lease is an agreement you make with a lessor to pay for a car for a period of no more than two years.

Learn how a short-term car lease works and the pros and cons and types of these leases to figure out whether to consider one for your transportation needs.

What Is a Short-Term Car Lease?

Similar to other car leases, a short-term car lease is a contract you enter into with a leasing company or dealership to pay for part of the value of a vehicle for a limited period of time. The distinction is that a short-term car lease term is shorter than the traditional lease term of two to five years, usually lasting two years or less.

How Does a Short-Term Car Lease Work?

If you need a set of wheels for many years to come, you might buy a car. If you need one for a few days, you might head to a car-rental company. But if you anticipate requiring your own set of wheels for a few years, you might lease a vehicle. Most traditional car leases last for 24 to 60 months. But for some individuals, the traditional lease length is longer than they want to commit to a particular make and model of a vehicle. You may secure a temporary job in a new location or have a family emergency whereby you only need a vehicle for a year or two, or even a matter of months. In such a scenario, a short-term car lease for a period of two years or less can be attractive.

With a conventional short-term lease, you agree to pay a leasing company a set amount of money per month to drive no more than a certain number of miles throughout the lease, usually around 15,000 miles per year. Your monthly payment will depend on a variety of factors, including the agreed-upon value of the car at the start of the lease, financing charges, capitalized cost reductions (like a down payment), lease term length, and residual value (the expected value of the car at the end of the lease).

As you're paying to drive—not buy—the car, when the lease ends, you'll either turn in your vehicle if you have what is known as a "closed-end" contract or negotiate the purchase of the vehicle if you have an "open-end" contract. That said, the way the lease functions depends on the kind of short-term car lease you get.

The monthly cost to lease a car is usually less than what you'll pay in monthly financing costs if you purchase a car.

Types of Short-Term Car Leases

A short-term lease can come in three forms:

  • Conventional lease
  • Mini lease
  • Lease swap

Conventional Lease

Available from leasing companies or dealerships, this type of lease functions as a traditional lease but comes with a shorter term of two years or less. Although such leases exist, they're difficult to find. If you do find such a lease, you might pay more than you would for a traditional lease, which typically costs $466 a month per Experian data from the first quarter of 2020, depending on the car and your location. Short-term car leases come with higher monthly payments than longer-term leases because the lesser may apply the same residual value for a lease of a longer term as that for a shorter term. But with a shorter term, depreciation costs are spread over fewer months, resulting in higher monthly payments.

Lessees typically need to undergo a credit check, make a down payment, and pay a security deposit to obtain a lease, as well as to get vehicle registration and insurance and perform scheduled maintenance on the car. You may also be on the hook for fees for early termination or excess wear and tear if you end the lease early or return the car with damage.

A new car loses a whopping 20% of its value in the first year.

Mini Lease

Many car rental companies offer "mini leases," which are actually long-term rentals typically lasting anywhere from several weeks to 11 months. Though you may have to pay a security deposit, the rental company typically takes care of vehicle insurance, registration, and maintenance, and some allow customers to exchange cars during the rental period and even avoid mileage limits. But such conveniences come at a higher cost: You can expect to pay between $700 to over $1,500 per month for a mid-sized rental vehicle.

Lease Swap

In a lease swap, also known as a transfer or assumption, you “take over” another person’s lease, including the mileage limits and any other restrictions that come with the existing lease. But you'll need to meet the same credit standard that the original lease owner met. Assuming you can find someone willing to swap, you'll often pay less per month than you would for a long-term rental and may only have to keep the car for a few months or a year.

Pros and Cons of a Short-Term Car Lease

Leases with shorter terms have their advantages and drawbacks. 

Pros
  • They're perfect for commitment-phobes.

  • A rare good deal can be found.

Cons
  • They can be expensive.

  • It may be a hassle to find one.

Pros Explained

The advantages of short-term car leases include:

  • They're perfect for commitment-phobes: If you know you won’t want or need to drive a particular vehicle for longer than two years, it might not make financial sense to have a longer lease that you might end up breaking. Nor would it make sense in that scenario to buy a new vehicle only to undergo the hassle of selling it a short time later; the financial hit from the vehicle’s first-year depreciation might be too much for most drivers.
  • A rare good deal can be found: If you see someone eager to break their car lease, whether it’s because of a cross-country move or a change of heart about the make or model of their leased vehicle, you might be able to assume it as part of a lease swap. If you’re lucky, maybe they’ll even offer you a financial incentive to help them out of a tricky situation. Likewise, you may encounter a leasing company that offers a bargain on a conventional car lease.

Keep your eyes peeled for a motivated lease owner if you opt for a lease swap. They might offer a cash incentive or cover the transfer costs.

Cons Explained

Disincentives to obtaining short-term car leases include:

  • They can be expensive: Whether you get a conventional short-term lease from a leasing company or a mini lease from a rental company, you can expect to pay more money for the privilege of a short-term commitment. You could even get stuck with required monthly payments that are larger than you can reasonably afford. When you factor in insurance, maintenance, and other expenses, a short-term car lease could easily overwhelm you financially.
  • It may be a hassle to find one: Only the rare leasing company offers conventional short-term leases because of the ensuing high costs and lack of customer demand stemming from depreciation in the early phase of ownership. Similarly, if you want to take over an existing lease, you'll have to find one through a lease-swap site (such as SwapALease.com) or dealership. You’ll also have to go through the same credit-approval process that a typical car lease seeker would, but you will have less time to benefit from the vehicle, despite the equal amount of trouble it took to secure.

Is a Short-Term Car Lease Worth It? 

Generally, it makes more sense for most individuals to stick with a regular lease of two years or longer or perhaps buy a vehicle. However, if you always insist on having a new set of wheels and you’re willing to do a lot of research and exercise patience in finding a good deal, you may have better-than-average odds of landing an affordable deal on a conventional lease or lease swap. Likewise, if you need a vehicle only for a few weeks, then it might make sense to bite the bullet and engage a rental company—especially if your employer will help cover the costs.

Key Takeaways

  • A short-term car lease is typically one that lasts two years or less.
  • Interested drivers can obtain conventional short-term car leases from leasing companies, mini leases from rental companies, or lease swaps from lease owners.
  • The monthly costs of a short-term lease or mini lease may be higher than those for a longer lease, but they provide a solution for commitment-phobes who don't want to tie themselves down to one vehicle for long.

Article Sources

  1. Board of Governors of the Federal Reserve System. "Negotiating Terms and Comparing Lease Offers." Accessed July 28, 2020.

  2. Federal Trade Commission. "Should I Lease a Car?" Accessed July 28, 2020.

  3. Experian. "State of the Automotive Finance Market," Page 22. Accessed July 28, 2020.

  4. Kelley Blue Book. "Q: What Is Car Depreciation?" Accessed July 28, 2020.

  5. Board of Governors of the Federal Reserve System. "Frequently Asked Questions." Accessed July 28, 2020.