One of the biggest decisions that parents have to face is what to do when their teenager becomes old enough to drive a car. Forcing the teen to drive the family’s current vehicles tends to create numerous logistical problems. Buying or leasing a new car for a kid is expensive and often impractical. Purchasing a used car for the teen can be risky as well. Maybe there’s another option.
More parents have started obtaining a short-term lease on a car for their teenage drivers. According to LeaseTrader.com, an online short-term auto lease marketplace, one-year leases for seniors in high school have shot up 17% from last year.
Why a Short-Term Lease?
Part of the reason lies with the dearth of quality used cars available in recent months (which means that the ones that are for sale carry higher price tags).
In addition, today’s graduated driver’s license plans have spurred many teenagers to wait until they are 18 years old to get their license. Doing this allows teens to avoid many of the restrictions placed on probationary drivers with new licenses — and also reduces the number of months they’ll need a car before they head off to college.
How to Get a Short-Term Lease
Very few auto leasing companies will offer a one-year lease on a new car. Usually, parents just purchase the unexpired terms of pre-leased vehicles. In other words, they essentially take over the final 12 to 14 monthly payments of an existing lease.
The Benefits and Drawbacks
A one-year lease arrangement has several advantages for families. First, there is rarely a down payment associated with short-term leases. Most vehicles that are available for one-year leases are only a few years old, so they’re usually safer and in better shape than an older used car. Parents can often set up the lease so that it runs out when their teen leaves for college — so they’re not locked into long-term deals associated with new vehicles.
But there are a few drawbacks to getting a 12-month lease for a teenager’s car. First, there’s the big bugaboo of all leases: mileage. If the teen exceeds the plan’s annual mileage allotments (commonly between 8,000 and 12,000 miles), the parents get socked with substantial overage charges. Also, lease agreements often require a higher level of vehicle maintenance than is frequently seen with car ownership; so if a busy teen falls behind on oil changes or tire rotations, more fees will be added to the lease termination amount. Finally, since the one-year lease vehicles are relatively new cars, auto insurance for the teen drivers is generally much higher than it would be on used cars that are several years old (especially if the leasing plan calls for additional damage insurance).
While one-year leases are not for everyone, they can benefit families who have certain needs. Some parents even promise to cover the lease payments for the car and give their teen a chance to save up enough money for his or her own vehicle when the lease expires. And for many other households, a 12-month lease gives parents a method to acquire a “temporary” car for their teenage driver for a finite period of time — without dipping into their child’s college fund.