Is leasing a car better for older drivers?

Leasing a car may not be top-of-mind for an older person, but it can be a better option than buying a new car for some. Older adults on fixed incomes who want to drive a new car with the latest safety features every couple of years or who want a shorter financial commitment could benefit from leasing rather than the long-term commitment of buying.

Benefits of car leases for seniors

There are several benefits you may want to consider when deciding if leasing a vehicle is the right choice as a senior.

Lower monthly payments

When you lease a vehicle, you will typically have a lower monthly payment and lower upfront costs than if you decided to finance the same model. As of the second quarter of 2024, the average monthly lease payment is $586, according to data from Experian.

“Although the price gap from leasing to buying has significantly narrowed in recent years … the monthly payment should be less expensive than buying a car,” says Ronald Montoya, senior consumer advice editor for Edmunds.

Monthly payments are lower because when you lease, you’re only paying a percentage of the total price of the car. Essentially, seniors should focus on finding an affordable lease payment, the cost of gas and car insurance premiums. However, lease agreements include extra fees and expenses, such as those for exceeding mileage limits. This can be an issue if you plan to do a great deal of traveling or road tripping.

Potential tax deductions

Older adults who choose to lease a vehicle while working part-time may benefit from tax deductions. This information can be checked ahead of time through the Internal Revenue Service.

By using the vehicle for work, older adult drivers may be able to take advantage of leasing tax benefits by deducting a portion of the lease payment on tax returns, as well as the cost of vehicle upkeep and the vehicle’s depreciation. This tax deduction benefit is only available for drivers who are leasing a vehicle while in semi-retirement and still working in some capacity, but it is still something to consider.

Access to the latest models

The best car leases for seniors provide the added benefit of driving the newest vehicles available on the market. Technology in today’s vehicles is constantly changing and ensures a much safer drive than in the past. For older people, the added security of the newest features — like rearview cameras, parking assistance and lane departure warnings — can be very valuable.It can also help lower the cost of insurance and your chance of an accident.

Those who continue to lease for the long term, cycling from one lease to the next, will always have the latest technology and safety features in the vehicles you’re driving.

Warranty coverage

A leased vehicle will have warranty protection on it. This means some repairs and maintenance costs are covered and will not come out of your pocket — although you may still be responsible for repairs that are not due to mechanical malfunction.

“With a leased vehicle, you never have to worry about any out-of-warranty repairs, since the car will have its factory warranty for the entire duration of the lease,” says Montoya.

Warranty coverage like this can be very valuable for older individuals, especially those who may be on a limited budget, as it eliminates much of the financial uncertainty or guesswork associated with vehicle ownership. Drivers will, however, typically have to pay for minor maintenance, such as oil changes and tire rotations.

Added flexibility

Since a lease typically lasts three years or less and a car loan is usually for five years or more, leasing can provide more flexibility for those who are unsure how much driving they will be doing in the coming years.

It may be easier for a retiree to predict their driving requirements just a couple of years into the future — but it might be more difficult to predict driving needs over five years because those needs could change much more dramatically.

Tips for getting the best deal

Before signing a new lease, make sure you’re getting the best deal possible by following these tips.

Negotiate the sale price

To get the best deal on a car lease, try to negotiate the car price on your own, just as if you were buying the vehicle. Negotiating the selling price is important because it is a key factor in calculating the car lease payment. Check sources like Edmunds or Kelley Blue Book to calculate the value of your car and better understand market pricing so you know whether you are getting the best deal.

Look for pre-negotiated prices

Another approach is to use a service that offers pre-negotiated prices. Organizations such as AAA (American Automobile Association), Costco and TrueCar offer these services, or you can go through a local bank.

Get only what you need

Other factors affect the cost of lease payments, including the residual value of the car, the length of the lease and the mileage limits. When contemplating a lease, be careful to avoid car leasing traps by only obtaining a lease that has a large enough mileage allowance to avoid excess mileage charges. Also, aim to pay no more than $1,000 in fees associated with obtaining the lease, commonly called “drive-off” fees.

Consider a lease takeover

Consider a lease takeover, which eliminates the need to negotiate the car lease and down payment with a dealer, since those steps have already been completed by the initial lessee. It’s just a matter of finding a takeover deal on a car that you might want and one that has an affordable monthly payment.

“There are websites that assist with swapping your lease to another owner,” says Montoya. “But lease swaps are not available for all brands.”

The lease marketplace SwapALease, for instance, provides a platform where lessees can offer their lease for takeover and car shoppers can peruse available cars. Pay close attention to the number of miles remaining and the length of time left on the lease to ensure that the lease will meet your needs.

What happens at the end of a lease?

At the end of a lease, you typically have two options: buy out the lease or return the car and start again.

Lease buyouts

Regardless of whether a car is secured directly from a dealer or an older person takes over a car lease for the remainder of the term, lessees have the option to buy out their lease at the end of the term for the amount stated in the lease contract.

When considering whether to buy, it’s important to consider the leased car as if you were shopping for a used car. Find out whether the car is priced similarly to other cars of the same make and model in the same condition and with similar mileage. If this is the case, then it may be a good buy.

Keep in mind that the costs of ownership will go up once the lease ends because the vehicle will no longer be under the same type of warranty. The cost of repairs and maintenance will now be the owner’s responsibility.

New leases

Of course, you can also return the vehicle and lease another vehicle. When you do this, you will have to put down another deposit — the major downside of leasing is that you don’t retain any residual value — and potentially pay lease end fees.

The disposition fee covers the cost of cleaning and preparing the vehicle for sale after you return it. You may also have to pay fees for any additional mileage and wear-and-tear on the vehicle.

Car purchases

Finally, you can opt out of the leasing system entirely. While this may not appeal to many seniors, especially with car prices still averaging close to $50,000, it is an option.

Just like with any other car purchase, be sure to compare auto loan rates to get the best deal. You should also shop around for new and used vehicles that suit your budget and driving needs.

Bottom line

Leasing a car instead of buying can be a good option for older drivers, depending on your budget and how you plan to use the vehicle. But weigh the pros and cons of car leases for seniors before signing on the dotted line.

Unless you plan to purchase the vehicle at the end of the lease term, you could be setting yourself up for never-ending car payments. If you plan to proceed with a lease, research market prices of the vehicle you’re interested in so that you can negotiate the best deal possible.