Renting, Leasing, and Buying Cars for International Students
Posted by Rohit Mittal
Disclosure: Stilt is a lending company. Nonetheless, we are committed to recommending the best loan products to our readers when their needs are outside Stilt’s loan offerings.
Depending on where you decide to study in the United States, you may be shocked to find that a car is necessary to get around town. This can be a tough challenge that many international students overlook at first.
As an international student, will be able to rent, lease, and even buy a car in the U.S.
Read on to learn more, or check out our video International Student Renting a Car in USA!
Table of Contents
Difference Between Renting, Leasing, and Buying a Car
The main differences when it comes to renting, leasing, and buying a car in the U.S. have to do with the length of possession and responsibility.
Renting – Renting a car is a short-term arrangement in which, for a sum of money, you can borrow a car from an agency for several hours to several days. Depending on your chosen car insurance, the responsibility, should something happen to the car, may or may not fall to you.
Leasing – Leasing is like a long-term rental in that eventually you must return the car to the dealership, but months or even years later. You do not own the car but are responsible to the dealer if something should happen. To learn more about leasing, click here.
Buying – When you buy a car, you own the vehicle outright and it is yours to do what you please with. If something happens to the vehicle, you are no responsible to anyone but yourself.
Renting a Car as an International Student
According to The Balance’s Miriam Caldwell, renting is a great option for smaller, shorter trips and for people who live in urban areas.
“If you live in a large city with good public transportation, there may not be any need for you to purchase a car…Running errands, such as going to the grocery store or buying larger items are another potential money-saver. If you cannot find a truck or large car to borrow, you can always rent one, which could end up being cheaper than paying for shipping a large item.”
As will be the case with leasing and buying a car as an international student in the U.S., renting a car is a simple process with some positive and negative aspects.
Pros and Cons of Renting a Car on an F1 Visa
Pros of Renting a Car
Owning a Car is Not Necessary – Renting a car removes the burden of owning a vehicle. It means no monthly payments, no costly repairs, and a host of other cost-saving advantages. Furthermore, as a student, you won’t have to worry about parking space availability at your university.
Right Size Vehicle for the Task – Renting a vehicle, as opposed to owning one, means that you can always have the right car for the task at hand. If you want to take a day trip to explore a local area, you can have the option to rent a sedan with good gas mileage. If you’re moving, as does happen so many times while at school, you can have a larger vehicle, like a truck, to get the job done.
Excellent for Vacation – Many international students like to take advantage of their time in the U.S. to explore the many states and cultures. But road trips can be put a lot of wear and tear on a car. But when you rent a car, there’s you don’t have to worry about wear and tear on the car because it’s not yours.
Cons of Renting a Car
Strict Terms and Conditions – Car rentals tend to come with many terms and conditions on the renter, many unfordable. Often times these terms and conditions can lead to hidden or unexpected additional costs for the renter.
Limited Variety – When renting a car, you’ll have access to a limited pool of models depending on stock and availability. So, if you were looking for an electric car to zip around the city or something fuel-efficient for long road trip, you might be out of luck if the dealer does not have the model in stock.
Potential Fraud Target – Many rental agencies brand their cars with their company logos, which can make your rental a target for fraud. Fraudsters may target your rental in schemes to collect insurance money or worse.
How to Rent a Car as an International Student
If you choose to rent a car in the U.S., the process is simple. To rent, you must meet the minimum criteria to rent in the U.S., which includes:
- Being at least 25 years of age
- Having a U.S. driver’s license
To rent a car in the U.S., you must:
- Reserve your rental online at the agency of your choice
- Choose the vehicle class and size you would like to reserve
- Include the agency-offered insurance in your reservation
- Pre-pay for your reservation online or pay for it when picking up the car
After that, all you have to do is return the car to the agency before your reservation ends.
There are a couple of items to about renting a car in the U.S. Above, it’s mentioned that a U.S. driver’s license is required for a rental. Please note that having a driver’s license issued by another country does not qualify you to drive in the U.S.
It’s also worth noting that some rental agencies will rent vehicles to individuals under the age of 25, but this will often come with an additional charge of about $15-$35 per day.
Leasing a Car as an International Student
Investopedia’s Daniel Kurt, while conservative about leasing in general, does say that under the right circumstances, leasing can be the right option for some people.
“For drivers who love stepping into a new car every few years, leasing can be an attractive option. Leases generally come with an option to buy at the end, but they make the most financial sense if you’re confident you don’t want to hold onto the automobile long-term.”
So, what are the benefits and drawbacks of leasing a car in the U.S.?
Pros and Cons of Leasing a Car on an F1 Visa
As with most major purchases, there are positive and negative aspects leasing a vehicle in the U.S. Your personal circumstances will determine whether the positives outweigh the negatives.
Pros of Leasing a Car
Less Cost in the Short-Run – If you know for sure that you will only need a car for a period of a few years (which is the case for most international students) or you have insufficient cash flow, leasing may be the more cost-effective option in the short-run. Because you do not have to pay the entire value of the car by the end of the lease, your initial down payment and monthly payments will usually be lower than if you bought the car outright. However, you will not be paying less interest overall.
Leasing Gives You Warranty Coverage – Most leases will still be under the vehicle’s warranty contract, which means that you will not have to pay out-of-pocket for any manufacturing issues (or other minor problems) with your car during your lease. Some dealers may even include basic maintenance with your lease.
Stay Up to Date with the Newest Cars – The reason many people choose to lease is somewhat less obvious — they always want to have the latest cars. If you fall into this category, leasing may be for you. Since most leasing contracts are three years or less, you can save money on the newest upgrade by starting a new lease each time.
Cons of Leasing a Car
Restrictions and Fees When Leasing – When you purchase a car, you are free to do whatever you want with it for as long as you want. When you lease, there will be a mileage restriction you must adhere to that depends on the length of your contract. The dealer will also charge fees if the wear and tear you put on the car is more than “normal.”
Strict Leasing Requirements – Most people find leasing to be the better option because they are unable to attain a loan, especially when it comes to international student car loans. What many don’t know is that dealerships may have even stricter policies on credit for lessees — this can be a major problem for international students. If your credit is good, but not great, it will be very difficult to get a good lease deal — if you can get one at all. You’d also have to purchase extra GAP insurance, which is required for emergency situations where the car is not returned at all.
Long-Term Loss for Lessees – In the long run, leasing a car will not save you money. While it may seem cheaper on the surface, over a period of 10 to 20 years, the interest on multiple leases will almost always be more than that of a loan to buy. And don’t forget that at the end of a lease you will have no car to show for all those payments — which is our hesitation about recommending an international student lease car.
How to Lease a Car as an International Student
If you want to lease a car as an international student, it’s important that you understand exactly what you are getting yourself into and how much you will actually be paying for your newly-leased car.
Generally speaking, to lease a car in the U.S., you will need to meet the minimum criteria and have:
- A good credit score
- Ability to make payments
- A driver’s license
- Car insurance
- Gap Insurance
As an international student, these requirements may impose difficulties when trying to lease a vehicle. In particular, credits scores and ability to pay are dependent on your history in the U.S. Do you have EAD as a student and a steady income? How long is your credit history in the U.S.? Have you imported your previous credit lines from abroad? Depending on the answers to these questions, you may or may not face difficulties when trying to lease a car.
Assuming you meet the minimum requirements, there are the general steps for how to lease a car in the U.S.:
- Pick a car you’re interested in leasing
- Find a dealer that leases the car you want
- Negotiate a price with the dealer that you are comfortable paying
- Make an initial down payment on the agreed-upon value for the car
- Pay the remaining portion of the lease in monthly installments
- Once your lease term is up, return your car to the same location
Remember that the price you negotiate won’t be the price you actually pay for the car — you are only responsible for the portion of that price that you are expected to use over the course of the lease. In other words, the “depreciation.”
Buying a Car as an International Student
When buying a car, there are many options available. You can buy brand new, barely used, or very used. It is important to research any car you’re interested in, negotiate with other dealers to get the best price and buy from a trusted source if the car is very old. Most international students will get a loan to help pay for the car over a period of years.
Pros of Buying a Car
We start with the good news yet again and will explore the pros of buying a car. Let’s hope they outweigh the cons
No Restrictions On Your Car – When you purchase a car outright, it’s yours to do whatever you please. You can drive it hundreds of thousands of miles over a period of 50 years and let it get banged up — if you want to. This is great for international students that want to go on epic road trips across the United States in their own car. You would not even be able to take half of the famous Route 60 if you decided to lease a car.
Lower Credit Requirements For Buyers – If your credit is less than great, it will easier to obtain a loan than a lease. The loan will require a down payment, but if you have no credit, this will probably be easier to accomplish than trying to rebuild your credit. This is a great opportunity for international students.
Long-term Savings – In the long run, buying a car will most likely save you money. It will not be difficult to find a loan with an interest rate that matches or beats the rate you would get on a lease. While you do have to pay the full price of the car, in the end, you will still have the car in your possession, which will help you build equity and can always be sold if you decide to leave the United States.
Cons of Buying a Car
Although buying a car comes with many long-term financial advantages, you will still have to consider the dent buying a car will put in your wallet. Each factor you should consider is written out below.
Car Maintenance Costs – When you purchase a car, all maintenance and repairs will be your full responsibility for the entire life of the car. While a lease agreement might provide more help in this area, it is also mandatory that you return the car in great condition. If you own your car, you’re the one that benefits from its upkeep.
Your Car’s Depreciating Value – One big downside of owning a car is that it will only decrease in value from the date of purchase. In this sense, a car is not a savvy “investment.” But if you plan on needing a car for several years, it can save you in many other areas (more job options, faster commutes, etc.).
You will have to pay more money upfront – Leases are very attractive because they often have a zero-down policy. This will not be the case when purchasing outright. Loans can require anywhere from 10-20% upfront.
How to Buy a Car as an International Student
If you’ve decided that owning a car is right for you, then the next step is to start the car-buying process. As with renting and leasing, there will be a minimum eligibility criteria international student need to meet to be able to buy a car in the U.S.:
- A good credit score
- Ability to make payments
- A driver’s license
- Car insurance
- Gap Insurance
Again, as with leasing a car, the biggest obstacles facing international students will be providing a good credit score (especially if you don’t have an SSN) and to prove that you are capable of making the payments.
If these obstacles won’t be an issue for you, then you can begin the car-buying process. Here are the steps to buying a car in the U.S.:
- Research Vehicles and Features
- Get Preapproved for a Loan
- Locate and Test-Drive the Car
- Check Sale Price and Warranties
- Review the Deal and Dealer Financing
- Close the Deal
- Take Delivery
Most of this is fairly standard when it comes to purchasing a car, but there one thing international students will want to take note of.
Due to the abovementioned issues with visa holders and U.S. credit scores, this may be easier said than done. If you do not have a U.S. or comparable credit score, there are steps you can take to provide sufficient documentation in lieu of a credit score, but this will not work with all lenders.
4 Options for Buying a Car as an International Student
Since the winning recommendation is buying a car in the United States, we want to list out some options available to you to make the massive feat feasible. The greatest barrier when buying a car as an international student is the upfront cost you will have to shell out to make your purchase. Nevertheless, some solutions to overcome this obstacle include:
1. Get a Loan to Fund Your Car
Securing a loan might be your best chance of getting the money you need to buy your car on your own. Although it might be difficult to get a loan as an international student without credit, it is not impossible. There are plenty of private companies, like Stilt, that use other criteria to evaluate whether you can be granted a loan or not.
To learn more about loans for international students, click here.
2. Ask a Family Member for Financial Help
If your family is supporting your studies in the United States, you might want to make a good case to them for why you need a car while you are abroad. Depending on their financial situation and how convincing you are, they might decide to cover some of the cost of the price so that you can use savings, or a smaller loan, to cover the rest.
3. Buy a Car Using a Credit Card
This option might be a little more difficult for international students that are not able to get a credit card in the United States due to a lack of credit history. However, if you can somehow get your hands on a credit card, whether foreign or American, you can try making payments on your car that way. Remember that some dealers will charge a “credit card handling fee” that can throw the budget you had in mind for your car out the window. Check with your dealer to learn if paying with a credit card is possible.
4. Use Peer-to-Peer Loans to Buy Your Car
This is a non-traditional route you can take that removes banks as intermediaries to get a loan. Also called social lending, peer-to-peer loans allow people to borrow from each other at sometimes cheaper interest rates than with traditional lenders. A peer-to-peer loan might also require a credit check, so look out for that requirement in your search.
Get on the Road to Freedom
Overall, although the biggest deterrent to purchasing a car is paying for the cost of the car upfront. There are many lenders, like Stilt, that offer great rates to borrowers from all backgrounds.
While buying may require a bit more planning, the benefits will almost always outweigh those of a lease when you consider the money you will save in the end!