When does it make sense to rent a car?

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Your situation alone determines whether a lease is the best option.


Key points

  • There is no single answer to whether you should rent a car.
  • In some situations, a lease is the best option, such as when you only need a car for a short time.

Some people believe that it never makes sense to lease a vehicle because it is impossible to accumulate equity by leasing. Others say they will only lease because leasing allows them to drive a car they might not otherwise be able to afford.

What matters is whether renting makes sense in your situation. Here, we’ll cover when leasing is the best financial option for you, and some things to consider if you decide to lease a car.

How does a lease work?

Most people buy cars because they hope to own them one day. When a vehicle is leased, it is more of a long-term lease. The lease period can range from one to five years, depending on where the driver wants their monthly payment to land and how often they like to change cars.

Typically, the allowed mileage on a leased vehicle is between 10,000 and 15,000 per year. Beyond that, the driver may end up paying excess mileage charges of up to $0.25 per mile. A driver may also be charged for any excess wear and tear on the vehicle. And, depending on how the lease is written, a driver who wants to exit a lease early could be responsible for any remaining payments.

While a lease certainly has its downsides, there are times when leasing is the right choice.

When does a lease make sense?

Because nothing in the world of finance is black or white, there are situations where leasing is the way to go. Here are a few.

When you like to swap vehicles

If you’re someone who doesn’t tend to keep a car for more than two or three years, leasing is a way to trade in when it comes time to buy something new. As long as you don’t drive more than 10,000 to 15,000 miles on the vehicle per year, you won’t be hit with excess mileage charges and can leave money in the bank.

When you need a luxury car

If you’re a real estate agent or someone who regularly drives clients around in your car, you might feel the need for a high-profile vehicle. Since a lease only charges you for the use of one car, it’s likely that you’ll be able to get a lower monthly payment for a “status” car.

When you need a vehicle for a short time

Whether you’re planning to move to a big city where you’ll take public transportation, are leaving the country for a few years, or are inheriting a vehicle from your grandfather, you may not need a a car for a long time. If so, it might make more sense to lease a car for a year than to buy a vehicle that loses more than 10% of its value by the time it leaves the dealership lot.

When lower monthly payments are vital

Let’s say you’re in college and need reliable transportation, but your monthly budget can’t handle an expensive car payment. When the two most important qualities of the vehicle you drive are reliability and a low monthly payment, a lease tends to offer both.

One thing that gives a lease a bad name is the cost it can cost to hand it over to the dealership. Before deciding to rent a car, be sure to read the fine print of the contract and ask yourself the following questions:

  • Can I keep my mileage below the maximum allowed? If not, be sure to set aside enough money to pay for excess mileage charges.
  • How long will I need this car? Never take out a lease for longer than you think you need the vehicle. And if you’re worried that circumstances will change and you need to return the lease sooner, find out exactly how much it will cost you to do so.
  • Who else is likely to drive this car? Let’s say your partner drives your vehicle occasionally and is notorious for “accidental parking” and generally disregards maintenance. Remember that you will be charged for excessive wear and tear on the car and plan accordingly.

While it is good to state that no one should ever rent a vehicle, that is simply not the case. In some situations, leasing is the best financial decision.

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