What's the same when you lease vs. rent a car?
The basic idea behind leased and rented vehicles is similar, especially when you compare renting or leasing vs. buying a car:
- They're both short-term commitments compared to buying a new car
- Someone else owns the car
- You can't make alterations or personalize the car
- There may be a mileage limit
- You can drive a new model car for less money than buying
What's different with leasing vs. renting a car?
Overall, the commitment level of leasing a car is much higher than renting one. The key differences between a car lease and a car rental are length of contracts, where you get the car, and how you're covered by auto insurance.
A lease typically lasts for two to four years, while rentals can last anywhere from a day to several months. You'll likely go directly through a car dealership if you're leasing. You can rent a car from a car rental company.
Most rental cars can be covered by your standard auto insurance, if you have it. If you don't, or if you want additional coverage, the rental agency will offer rental car insurance. With a leased car, you'll be required to have your own auto insurance policy. You'll need at least your state's minimum car insurance coverage requirement. Many lessors may require you to purchase additional coverage to meet their car lease insurance requirements since the car is theirs.
Pros and cons of leasing vs. renting a car
If you're looking to drive the same car for a couple years without buying it, a lease may make more sense than renting. Keep in mind that entering a lease involves a down payment followed by monthly payments for the lease term. Consider these pros and cons of leasing a car:
Pros of leasing
- Leasing gives you a wider selection of cars: When leasing a car through a dealership, you'll have the choice between most of their car models. Rental companies generally have a smaller selection and can't guarantee an exact model.
- Leasing may cost less than renting: You'll typically pay less per month on a lease vs. a rental car of the same model for the same amount of time.
- You can buy the car at the end of your lease: Some lease agreements let you buy out your lease. Once your lease ends, you can pay for the rest of the car's value (as set in your lease terms), and the car will be yours.
Cons of leasing
- Lease terms are two years or more: If you want a car for a shorter period, a lease may not be right for you.
- It takes time to finalize a contract: There's more paperwork required when leasing vs. renting a car. Many lessors may also look at your credit score and income to help ensure you can make the monthly payments.
Why rent a car long-term instead of leasing?
There are two key benefits to choosing a long-term rental over a lease: speed and flexibility. Leasing a car often requires a credit check and a longer application process. If you have a low credit score or need a car quickly, renting will likely get you into a vehicle faster. Rental terms vary by company, but some allow rentals contracts for up to a year. Car rental companies may also offer the possibility of changing cars more frequently. With a lease, you're typically stuck with the same vehicle for your full lease term.