Lease Term

Lease Term Definition

Lease TermLease Term is the length in months of your lease contract. The Lease Term is simply the agreed-upon number of months that you will continue making monthly payments to lease the car. The most common Lease Term is for 24 or 36 months. There are also 48 and even 60-month lease terms, but they are not quite as common.  Because most car manufacturer warranties expire after 3 years, most people prefer leasing cars for 36 months or less. By leasing cars for 3 years or less, you will most likely never need to replace brakes, tires and other maintenance items. There is another reason for a 36-month-or-less lease term:  Depreciation. Cars that are 4 or 5 years old will have a much lower residual value. So, even though you may are dividing your payments out for a longer period of time, it may not result in a reduced payment. In some cases, 48 and 60 month lease terms will actually result in a higher payment. You may notice some in-between year lease terms being offered by car manufacturers like 27-Months, 39-Months and 42-Months. There is one thing to watch out for with these odd lease terms: Your state registration laws and costs. If you pay a registration fee every year and your car lease ends after 39 months, you will be getting double dipped for the registration fee in a 3 month period. Once at the end of the 3rd year for the old car, then once again for the new car.

What is the Best Lease Term?

A 36 month lease is the sweet spot. In 3 years, you should never have to pay for new tires, brakes or other types of repairs. 3 Years is just long enough to really get your fill and enjoyment of a new car. In fact, the new car smell will still be there after its second year. A 24 month lease term will go by way too fast for most of us and if you live in a state like Colorado where the new car registration fees are high, you’re going to dread paying that bill every two years. In Colorado, the registration tax and fees on a $25,000 car is about $600. Figure that into your average car payment. Ouch. Registration fees decline by about 30-35% each year you drive the car to reflect its declining market value. Taxes and registration are a good argument towards going back to the longer, 48-month and 60-month lease terms. Even the cost of new Tires and Brakes may not exceed paying those exorbitant registration fees every 2-3 years. The other thing to watch out for in your lease term is mileage. Most car lease deals allow for 10,000 or 12,000 miles a year. Always negotiate for the 12,000 mile lease. most of us can comfortable keep our cars with the 12,000 mile a year limit, even with a couple of road trips each year. Anything beyond the allowed mileage results in a .15 – 25 per mile fee at the end of your lease term. Of course, if you go over your mileage and don’t want to pay those fees, you can always negotiate a trade-in with your dealer. Just understand that your options and bargaining power are going to be somewhat more limited than they would be had you kept your mileage under the terms of the lease.

Is the Lease Term Negotiable?

The Lease Term is negotiable, but keep in mind that wavering from the terms of an advertised lease special is usually not going to work in your favor. The attractive advertised lease specials are based on dealer incentives,  a money factor, residual value and the lease term. All of these Lease Components are factored in together to provide the most attractive monthly car payment.  There are specials circumstances where negotiating the lease term may work in your favor, especially if it is for a car that is not listed among the manufacturers car lease deals Don’t spoil a good car lease deal by asking for an unreasonable lease term.

2 thoughts on “Lease Term”

    1. Very simple. The stated value of your vehicle at the end of the lease is known as the residual value. This is an important figure that was used in calculating your lease payment. This figure (residual value) is stated on your lease invoice or paperwork.
      Hope this helps,


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