There are many downsides to lifting. None of them are very major, but it is important to be familiar with and accept them all:
Lifting a vehicle takes it out of factory specs, so parts will wear faster (example, ball joints + CVs are operating at an angle that they were not designed for). How much faster is anyones guess, but a well-designed and installed lift kit should minimize that difference.
Larger tires means increased strain on the driveshafts and transmission. Not much different, but it is a difference.
speedometer will not be correct if the tire size is different. For a couple inches in diameter, it could work out to 5mph at highway speed or so.
There are some laws regarding bumper and headlight heights that you could potentially be in violation of if you lift a vehicle. A lift on a KJ of 3" or so is most likely within the laws.
warranty may not cover parts that fail as a result of the lift. On paper, the dealership needs to prove that the lift is the cause of the failure, but realistically, dealerships often just deny a warranty claim and leave you with the responsibility of proving that the lift did not cause it.
Cost of lift does not add to the value of the vehicle as far as insurance and resale value are concerned. A rule of thumb is that you will not get any of that investment back unless you part it out.
Some insurance companies will not cover modified vehicles. That may mean they won't give you a policy, or it may mean that they will not cover damages to your vehicle.
Some banks will not be happy if you modify a vehicle that they hold the lein on.
Higher rollover rate due to the raised center of gravity and increased travel of suspension (possibly higher body roll)
A taller vehicle will be harder to fit into garages, under bridges, etc. A KJ with a 3" lift can be over 7 feet if you have a roofrack, basket, antenna or anything else. Some parking garages can be 6'5" or less.
So as you can see, no major downsides, but a lot of little things to consider.
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Jeff 2005 Jeep Liberty Renegade
4x4, 6spd, Leather, Sunroof, trak-loc, skids/rails, hitch+shackle, hooks, Alpine/iPod, Thule, GPS, CB, Frankenlifted w/ 31" MTRs
Photos Cardomain