24-Month vs. 36-Month Leases

By

Senior Pricing Analyst

As CarsDirect’s resident pricing analyst, Alex offers must-know analysis of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured in publications such as Car and Driver, Motor Trend, Automobile Magazine and Autoblog.

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, Senior Pricing Analyst - October 16, 2018

Given that traditional leases are generally offered for 36 months, 24-month contracts offer an alternative for shoppers looking to upgrade sooner to their next vehicle. However, although payments may look reasonable, 24-month leases can often be more expensive when it comes to monthly costs.

Apart from the fact that discounts, interest rates and residual values can differ for 24 and 36 month leases, there's also the fact that not all brands offer a shorter-term option. Some examples of mainstream brands known for having 24-month leases include Chevy, Buick, GMC, Hyundai, Kia and others.

Here, we'll look at some factors that may help you determine whether a 24 or 36 month lease is right for you.

Different Residual Values

Shorter leases generally offer the benefit of higher residual values, something that often helps lower the cost of a lease.

For example, 2019 Kia Sorentos have a 24-month residual of up to 61% depending on trim. That drops to 57% with a 36-month lease.

In the case of the 2018 Chevy Trax, the 24-month residual is 59%, compared to just 51% with a 36 month contract.

Different Interest Rates

The interest rate, called a money factor when it comes to leases, is often different on 24 and 36-month leases.

For example, Kia's money factor on the 2019 Sorento SX is 0.00206, or 4.9% APR. The rate on a 36-month lease is slightly better at 0.00204, or about 4.8% APR.

In the case of the Trax, you'll likely find higher rates on short leases. Chevy's 24-month APR comes out to 2.71%, versus 2.35% on a 36 month contract.

Different Discounts

You may find that shorter leases are subject to different amounts of discounts. We often find brands like Kia and Hyundai tend to offer much better incentives on 24-month leases.

For example, the Sorento SX is eligible for up to a $8,220 lease discount on 24-month contracts. The amount drops to $7,030 with a 36-month lease.

You generally won't see the same sort of quirk from GM. For example, the Trax features a $1,000 lease cash incentive on both 24 and 36 month leases.

Case Study: 2019 Kia Sorento

Kia's 24-month lease on the Sorento LX is $249 per month with $2,999 at signing, an effective cost of $374/month. That's $8,976 over the life of the lease before taxes & fees.

You also have a 36-month option at $239 per month with $2,999 at signing. That comes out to an effective cost of $322/month, or $11,592 over the course of the contract.

Here, the 24-month lease does mean spending $2,616 less over the course of the lease, but your monthly costs will be $52/month higher.

Learn more about the Sorento »

Case Study: 2018 Chevy Trax

Chevy's 24-month lease on the Trax LT is $189 per month with $4,459 at signing. That equates to an effective cost of $375/month, or $9,000 over the life of lease.

In contrast, the 36-month deal is $189 per month with $4,299 at signing. Here, your effective cost comes out to $308/month, or $11,088 over the lease.

In this case, the 24-month lease will save you $2,088 over the course of the lease, but you'll be spending an extra $67/month.

Learn more about the Trax »

Conclusions

24-month leases may offer additional flexibility, but most shoppers will find they cost a lot more money when it comes to monthly payments. If your priority is monthly affordability and getting more for your money, you'll probably find a 36-month contract to be a smarter choice.

Most shoppers may not be aware that automakers offer programs referred to as pull-ahead and early turn-in offers to help get you into a new car faster than what's stated on your contract. Nuances differ for each brand, so we recommend working with your dealer to identify an option that best meets your needs.

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, Senior Pricing Analyst

As CarsDirect’s resident pricing analyst, Alex offers must-know analysis of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured in publications such as Car and Driver, Motor Trend, Automobile Magazine and Autoblog.

Follow On: Twitter | Website