How Old Do You Have to Be to Lease a Car?

Exciting car commercials advertising the best car lease deals can make you want to drive to your nearest dealership and sign up for a lease. However, most car leases maintain eligibility requirements that come with age restrictions. Namely, you must be at least 18 years old to be eligible to enter into a legally binding contract, let alone lease a car. 

Car leasing describes a legal agreement between a lessor (a leasing company or dealership) and a lessee (someone wanting to lease a car). Rather than buying a car outright with cash or financing an auto loan, lessees drive a leased car for a set amount of time and return it, similar to a long-term rental. However, leasing does differ from renting in a few key ways. 

When you lease a car, your monthly payments are based on the difference (depreciation) between the current selling price (capitalized cost) and the projected value once the lease ends. The projected selling price at the lease end (residual value) often represents the majority of the lease buyout price as well, plus a few dealership fees. The interest rate of a lease—otherwise known as the money factor—also influences your monthly payment based on your credit score and credit history. 

You can reduce your monthly payments by maximizing your capitalized cost reduction. Trade-ins, lease deals, and incentives all qualify. Leases limit drivers to the lessee and their spouse only. 

Leases also come with set terms for mileage, length of the lease, and wear and tear. Mileage restrictions result in penalties if you exceed them. At the end of your lease, you must pay for additional wear and tear beyond what’s expected, including dents, dings, scratches, rips, tears, and any other interior or exterior damage. 

Some lease agreements allow you to buy the car once your lease ends. Buying your lease can help you get into a car whose history you know for less. You can also sell it for profit if the residual value is lower than the current market value. Lease-end fees also include a disposition fee if you don’t buy the car or a purchase option fee if you do.  

In addition to age, most leasing companies set forth insurance, income, and credit eligibility restrictions. Some lessors require a security deposit, depending on how high a risk you pose. You must also hold a valid driver’s license or otherwise arrange for a licensed driver to pick up the vehicle. 

Income

In conjunction with your credit score, leasing companies will evaluate your ability to qualify for a lease based on your income. If you make enough to afford payments comfortably, that’s one more barrier removed and an element of risk reduced. However, an imbalance in your debt and income can prevent you from qualifying for a lease. 

Credit

The $0 down advertised car lease deals you see on TV account for lessees with a near-perfect credit score who qualify for an extremely low money factor. It’s best to do a credit check and have a credit score above 700 to qualify for superior lease deals. While age and credit score don’t necessarily correspond among lessees, achieving a perfect credit score can be more challenging for young people. 

Insurance

Leasing companies require lessees to carry higher insurance coverage limits than the minimum cover the state legally requires. Depending on how much coverage you typically opt for with your personal vehicles, you may pay more or less to insure a leased vehicle. The leasing company wants to protect their investment, but it’s a matter of how clean your driving record is to determine your monthly or annual premiums. 

Figuring out when leasing a car makes sense can be tricky, especially if you’re considering a lease for your 18-year-old. A young adult can lease a car alone, but it may be advantageous for a parent to co-sign the lease for several reasons: 

• Leasing companies charge lessees under 25 higher security deposits
• Co-signing and submitting parental credit can lower the lease money factor
• Parents can keep track of payments and terms to assist their children in properly handling a lease

However, parents should know they’re held equally liable if their child violates the lease terms. This responsibility can mean taking on the responsibility of lease payments if your child misses one. You may also be on the hook for excess mileage or damage to the car beyond normal wear and tear.   

In contrast, many parents see the value of a lease in accessing the latest technology and safety features. Newer cars tend to be safer than older cars and may even account for some of the blind spots (no pun intended) young drivers have as they gain driving experience. Older cars can also cost more in maintenance, which can drain your young adult’s budget.  

Ultimately, the decision rests on your experience, maturity level, and what you envision for your child regarding future transportation. Leases cost less upfront, and most of the maintenance is covered under the manufacturer’s warranty. However, loans can have an equally consistent payment schedule and allow your child to use the equity in paying the car loan off to their advantage. Owning a reliable vehicle after college can also help your child allocate funds to other goals. 

The decision to allow a young adult to lease a car differs on a case-by-case basis. Here are a few considerations to factor into your thinking: 

• Young adults lack driving history and experience  
• Most young adults have yet to or are just beginning to establish their credit
• Teens may not have a steady source of income to make lease payments or cover additional car maintenance expenses
• Young adults who lease may not have a car to drive after the lease ends
• Teens are already one of the highest-risk demographics regarding car insurance rates, and leasing requires additional coverage beyond what the state requires
• Maintaining the car to lease standards can be difficult for some young adults
• Mileage and modification restrictions can be limiting as well

While additional insurance coverage isn’t bad for a young adult driver, it’s best to look at the bigger picture. Sure, your insurance policy may cover a rental car during repairs, but are you really saving money or gaining anything by leasing instead of buying a more affordable car outright? Insuring a car you’ve financed or bought with cash, even to higher limits than legally required, can put you ahead if the vehicle is deemed a total loss because you receive the payout, not the leasing company.