How Old Do You Have To Be To Lease A Car? What To Know
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For the right driver and situation, leasing a car can make sense instead of a purchase. In most cases, a lease will get you a more expensive car for a lower monthly payment versus traditional financing. Additionally, a lease can be ideal for a student or younger driver who just needs a reliable vehicle to get to school or a part-time job.
Which brings up the question: how old do you have to be to lease a car? It’s an important consideration if you are thinking of leasing a car for yourself or a younger loved one. Read on as we take you through the details.
How Old Do You Have to Be to Lease a Car?
Let’s get this question answered right away. Legally, a lessee (an individual who leases a car) must be at least 18 years old. In most states, a minor (someone under 18) cannot enter into a contract for something other than necessities (like food, clothing, or lodging). So, an individual has to have the legal ability (meaning they are of legal age) to enter into a leasing agreement.
That said, being 18 doesn’t mean someone can just go out and lease a car. There’s a lot more involved. Let’s first look at what is a car lease.
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Car Leasing Basics
Think of a car lease as a long-term vehicle rental. Unlike with a purchase, where the title transfers to the buyer or a finance company, the leasing company (usually the manufacturer or a subsidiary) retains the title but grants the lessee permission to use the car in exchange for monthly payments. A typical lease lasts 36 months and provides a mileage allowance of 36,000 miles (but longer or shorter terms are available, as are different mileage allotments). At the end of the term, the lessee returns the car to the leasing company, or they may buy the vehicle at a pre-agreed upon price.
In addition to the monthly payments, a lessee may make an upfront payment of a few thousand dollars to cover sales tax, a security deposit, and other fees. At the end of the lease, a disposition fee may be charged (but not always), and the lessee may have to pay for damage beyond normal wear and tear or any excess mileage.
Credit and Car Leasing
Because a car lease is another way to finance a vehicle, the leasing company requires its customers to have good credit. Each outfit sets its standards for this. But the long and short of it is that a lessee is trusted with something valuable (the leased car). So, the company wants to be sure it gets paid each month and will get the car back at the end of the lease. In other words, asking, “how old do you have to be to lease a car?” isn’t enough. You not only have to be of legal age, but you must also have a good credit rating.
This can create a dilemma for a younger person who may have no credit at all or a minimal credit history. In these situations, a leasing company may pass on the lease or require a co-signer. In some cases, the easiest approach is to have a parent lease a car in their own name and just give the younger driver permission to operate the vehicle.
Income and Car Leasing
Along with a good credit rating, a car leasing company will set income thresholds for its customers. Put another way; the firm wants to know you have enough money coming in to cover your regular expenses and the monthly lease payment.
Even with sufficient credit history, a college student working 15 hours a week likely won’t meet a leasing company’s income requirements. On the other hand, a 20-year-old (with good credit) working full-time and without overwhelming monthly expenses may qualify for a lease without a co-signer. There’s no exact formula (each leasing company is different), but capping a monthly lease payment at 15-20% of your salary is a good guideline.
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Insurance and Car Leasing
Leasing companies also require customers to take out sufficient automobile insurance. The increase in premiums can be a shocker if you’ve been driving a clunker with minimal coverage or haven’t been driving at all. The cost is high to repair the high-tech safety gear that’s standard in many modern cars. As a result, insurance costs can be more expensive than with an older car.
Before leasing (or buying) a car, always talk with your insurance company first (or use this opportunity to speak with multiple insurers) to see what coverage for a new vehicle might cost.
Another type of coverage to consider is gap insurance (which may be included with some car leases). In an accident when the leased car is totaled, a gap policy will cover the difference between what the insurance will pay the leasing company for its vehicle and any remaining lease balance. Otherwise, in this situation, you might have to pay the difference yourself.
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What To Know About Lease “Deals”
Seeing an ad for a $99 per month car lease or something similar can be appealing. The idea of driving a new car for less than a daily cup of Starbucks can be a perfect transportation solution for young drivers and their parents.
The truth is that trying to find a car lease with a cash outlay of only $99 per month (or whatever the low monthly payment is) is almost impossible to find. Such deals were more common in the pre-pandemic world, but often these too-good-to-be-true offers have a catch in the form of a large down payment. Or, you’ll need to pay taxes, freight, or other fees upfront.
For example, a $99 per month lease (for 36 months) with a $3,600 upfront cash outlay or downpayment (called a capitalized cost reduction in lease jargon) means this lease really costs $199 per month. Reading and understanding the fine print with any lease deal is essential.
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